The choice of the person to govern a central bank is one politicians and financial markets take very seriously.
Chancellor George Osborne devoted a fair proportion of 2012 to the pursuit of his ideal candidate, and eventually persuaded the Canadian Mark Carney to accept the governorship of the Bank of England.
Although there was a formal interview process, there was little doubt who was going to get the job. A key factor in these matters is that candidates should not have too many enemies.
Nobody in high places wanted to veto Carney, whereas in the past the road to the governor's parlours has been littered with the bodies of outstanding candidates who incurred black marks.
The big international news in these matters last week was that Lawrence Summers, President Obama's favoured candidate to succeed Ben Bernanke as chairman of the US Federal Reserve, withdrew from the race because it had become clear that he had too many enemies on Capitol Hill, and the confirmation (or not) process threatened to become an embarrassment.
Although people speak very highly of others in the running, such as Bernanke's deputy, Janet Yellen, it is nevertheless sad that someone of Summers's outstanding ability and experience – he is a formidable economist, was treasury secretary under Bill Clinton and, more recently, a key economic adviser to Obama – should have felt it necessary to withdraw his candidacy for the most important central banking job in the world.
One objection was his championship of deregulation in the 1990s. But he was not the only one: there was an international consensus in favour of such moves at the time, and Summers has undoubtedly learned from experience.
The consequences of deregulation and blind faith in the all-too-invisible benefits of financial engineering have been with us since 2007 and the onset of the financial crisis – which did not, as some appear to believe, begin with the collapse of Lehman Brothers in September 2008, but was most certainly aggravated by that fiasco.
But Summers learned the hard way, and was a powerful force for good in Obama's White House when it came to rescuing the system, in the face of Neanderthals who opposed the worldwide fiscal and monetary stimulus of 2008-09 and the rescue of the banks. Summers's US critics were evidently worried he would be "too hawkish".
Clearly, they were not acquainted with, or chose to ignore, the impressive series of articles he has written over the past few years for the Financial Times, one consistent theme being the dangers of withdrawing the stimulus when sustained economic recovery is far from assured, as Bernanke re-emphasised last week.
Which brings us back to the UK and the debate about economic recovery here. The chancellor – endorsed, laughably, by deputy prime minister Nick Clegg – maintains that the recovery we are experiencing is the result of his policies of austerity and indeed caused by them. (I'm not making this up.) To the chancellor, critics of his policy have been proved wrong, simply because there are the beginnings of a recovery.
The emphasis, by the way, must still be on "the beginnings", because with average incomes barely rising, and at a rate markedly below the rate of inflation, it is difficult to see how a broadly based recovery can be sustained.
Hence the chancellor's stoking-up of a housing bubble, with all the familiar dangers that entails. With characteristic hyperbole, Osborne maintains that his critics argued that, in the face of his austerity policy, there could be no recovery.
It would be more accurate to say that what we were all concerned about was the way the fiscal squeeze was inhibiting the chances of recovery, and that an awful lot of output was being lost meanwhile, and an awful lot of unnecessary damage inflicted, especially on the most vulnerable members of society. (See your local newspaper passim.)
Output in the UK is still some 3% below its level in 2007-08, and some 17% below what might have been expected from historical trends.
Just think of all the business investment opportunities that have been missed! Now, the effect of the banking crisis on the availability of credit had a major impact, as did attempts by businesses and individuals to cut back – "deleveraging", as it is known in the trade.
And, no, we were not helped by the depressed condition of our important markets in the eurozone. But these were all reasons for the government to counteract the impact of the depression by continuing with the stimulus it inherited from Labour, instead of raising VAT and inflicting harmful and unnecessary cuts.
When, amid all the razzmatazz surrounding Carney's arrival at the Bank in August, he held his first press conference, your correspondent asked him to what extent the fiscal squeeze was counteracting the Bank's attempts to encourage recovery.
With great aplomb, the new governor ducked the question and answered a completely different one. But during his recent testimony to the Treasury select committee, Carney made a very important statement, and went way off message as far as his patron Osborne was concerned.
"The fiscal adjustment," said the governor, "has been a drag on growth." I shall repeat that: the fiscal adjustment has been a drag on growth – not, as the chancellor would have it, the cause of the recovery.
theguardian.com
Chancellor George Osborne devoted a fair proportion of 2012 to the pursuit of his ideal candidate, and eventually persuaded the Canadian Mark Carney to accept the governorship of the Bank of England.
Although there was a formal interview process, there was little doubt who was going to get the job. A key factor in these matters is that candidates should not have too many enemies.
Nobody in high places wanted to veto Carney, whereas in the past the road to the governor's parlours has been littered with the bodies of outstanding candidates who incurred black marks.
The big international news in these matters last week was that Lawrence Summers, President Obama's favoured candidate to succeed Ben Bernanke as chairman of the US Federal Reserve, withdrew from the race because it had become clear that he had too many enemies on Capitol Hill, and the confirmation (or not) process threatened to become an embarrassment.
Although people speak very highly of others in the running, such as Bernanke's deputy, Janet Yellen, it is nevertheless sad that someone of Summers's outstanding ability and experience – he is a formidable economist, was treasury secretary under Bill Clinton and, more recently, a key economic adviser to Obama – should have felt it necessary to withdraw his candidacy for the most important central banking job in the world.
One objection was his championship of deregulation in the 1990s. But he was not the only one: there was an international consensus in favour of such moves at the time, and Summers has undoubtedly learned from experience.
The consequences of deregulation and blind faith in the all-too-invisible benefits of financial engineering have been with us since 2007 and the onset of the financial crisis – which did not, as some appear to believe, begin with the collapse of Lehman Brothers in September 2008, but was most certainly aggravated by that fiasco.
But Summers learned the hard way, and was a powerful force for good in Obama's White House when it came to rescuing the system, in the face of Neanderthals who opposed the worldwide fiscal and monetary stimulus of 2008-09 and the rescue of the banks. Summers's US critics were evidently worried he would be "too hawkish".
Clearly, they were not acquainted with, or chose to ignore, the impressive series of articles he has written over the past few years for the Financial Times, one consistent theme being the dangers of withdrawing the stimulus when sustained economic recovery is far from assured, as Bernanke re-emphasised last week.
Which brings us back to the UK and the debate about economic recovery here. The chancellor – endorsed, laughably, by deputy prime minister Nick Clegg – maintains that the recovery we are experiencing is the result of his policies of austerity and indeed caused by them. (I'm not making this up.) To the chancellor, critics of his policy have been proved wrong, simply because there are the beginnings of a recovery.
The emphasis, by the way, must still be on "the beginnings", because with average incomes barely rising, and at a rate markedly below the rate of inflation, it is difficult to see how a broadly based recovery can be sustained.
Hence the chancellor's stoking-up of a housing bubble, with all the familiar dangers that entails. With characteristic hyperbole, Osborne maintains that his critics argued that, in the face of his austerity policy, there could be no recovery.
It would be more accurate to say that what we were all concerned about was the way the fiscal squeeze was inhibiting the chances of recovery, and that an awful lot of output was being lost meanwhile, and an awful lot of unnecessary damage inflicted, especially on the most vulnerable members of society. (See your local newspaper passim.)
Output in the UK is still some 3% below its level in 2007-08, and some 17% below what might have been expected from historical trends.
Just think of all the business investment opportunities that have been missed! Now, the effect of the banking crisis on the availability of credit had a major impact, as did attempts by businesses and individuals to cut back – "deleveraging", as it is known in the trade.
And, no, we were not helped by the depressed condition of our important markets in the eurozone. But these were all reasons for the government to counteract the impact of the depression by continuing with the stimulus it inherited from Labour, instead of raising VAT and inflicting harmful and unnecessary cuts.
When, amid all the razzmatazz surrounding Carney's arrival at the Bank in August, he held his first press conference, your correspondent asked him to what extent the fiscal squeeze was counteracting the Bank's attempts to encourage recovery.
With great aplomb, the new governor ducked the question and answered a completely different one. But during his recent testimony to the Treasury select committee, Carney made a very important statement, and went way off message as far as his patron Osborne was concerned.
"The fiscal adjustment," said the governor, "has been a drag on growth." I shall repeat that: the fiscal adjustment has been a drag on growth – not, as the chancellor would have it, the cause of the recovery.
theguardian.com
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