I argued on the Today programme on Radio 4 this morning that the Bank of England's independence from the Treasury is just a charade. It was always designed to appease the stupidity of the bond vigilantes. This is why. It is Section 19 of the Bank of England Act 1998:
To put it another way: they have independence so long as they do what the Treasury wants or independence can be suspended at any time.
And that is precisely why the Bank of England has always done what the Treasury wants, as I said. They really don't have much choice in the matter.
It's time we talked economic reality and not the silly games people have played in pursuit of neoliberalism.
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I think you should be nicknamed the new ‘Motor-mouth’. You were formidable and on top form. It was a joy to hear you although I felt a touch of sympathy for the poor interviewer who ‘faint but pursuing’ was trying to argue that the BoE and OBR are independent. Your line about the OBR being two doors down from the Chancellor was pretty devastating. I don’t think anyone should worry about you’re not being able to fight back 🙂
Thanks!
And if I was given the power to argue then I am going to use it for a good cause
“You were formidable and on top form.”
Hear, hear. Assertiveness is an important quality for such interviews, a great example for the coming assault on democracy.
syzygysue, can you please post the link to the programme? I tried the one broadcast today, but it doesn’t mention richard in its written summary.
Start 15 minutes in and 75 minutes in
It’s not just the BoE; the “independence” of all of the other so-called economic regulators or competition bodies is a total charade. The projection of this illusion of independence (and the ferocity with which this illusion is defended) serves two purposes. First it protects and insulates governing politicians from the repercussions of unpopular decisions (e.g., when interest rates rise or utility prices increase). Secondly, it allows governing politicians to delegate responsibility to these bodies to make decisions that favour the corporate capitalists, private equity and hedge fund operators and high wealth individuals who have suborned them – at the expense of the vast majority of ordinary citizens as taxpayers and consumers. This is nothing to with liberalism, neoliberalism or free markets; it is simply the acquisition, retention, exercise and abuse of politcal and economic power by powerful and infuential special interest groups.
The Corbyn phenomenon is causing the scales to fall from the eyes of more and more people. More and more citizens are beginning to see how they’re being gouged. They always knew that were being gouged, but such a complex edifice of legislation and regulation has been constructed to facilitate this gouging and the process was covered in so many layers of bullshit that they couldn’t see it clearly or understand it. Now they’re beginning to. And the powerful, influential and privileged special interest groups doing the gouging and the politicians who pander to their desires are beginning to take fright – and so they should. But the assault on Jeremy Corbyn, on Corbynomics and on those who advance it will be savage, vicious and sustained.
Agree with that Paul
Much of devolution is about blaming too
And yopur last sentence is spot on and already happening
I expect there are quite a few of us with a certain amount of expertise in a variety of economic sectors, who have been energised by this rejuvenation of the dessicated hulk of the Labour party and by the outlining of key economic policies that reveal the extent to which ordinary citizens are being exploited and who would welcome guidance on how we might provide effective assistance to the effort – particularly following the almost certain election of Jeremy as leader when the the ferocity of the internal and external attacks will be ramped up. Any thoughts?
Although I have a number of concerns about aspects of the policies being advanced that expose them to unjustified attack, I expect they will be ‘refined in the fire’. The biggest concern I have is that this is taking place in just one OECD country. The globalisation of capitalism makes any effort at change one economy – however large it might be – very vulnerable. And we can be sure that any vulnerability will be exploited.
It would be good to develop an international dimension. However, I can’t see Bernie Sanders making much ground in the US – though he may force Hillary Clinton to adopt more progressive policies (but any implementation will require a big shift in Congress). The NDP in Canada should make progress in the upcoming election, but maybe not enough. There’s a centre-right hegemony in much of the EU. Many of Labour’s EU sister parties are also dessicated hulks – mostly out of power, or, if in power, subservient to dominant centre-right parties or to a centre-right ideology. There are doubts that Germany’s SPD will contest the next federal election as a separate entity – remaining sunservient to the CDU-CSU. Syriza looks set to replace PASOK and will implement centre-right policies. The PSOE is going nowhere – but neither is Podemos. Hollande may not even make the second round of the French presidential election in 2017.
That doesn’t mean there isn’t a huge latent demand for what Jeremy is offering internationally – and particularly within the EU. But it needs to be tapped in to – and ideally via the rejuvenation of the existing centre-left parties as Corbynism is achieving in Britain.
I am a little more optimistic than you
But I have to be
“…in pursuit of neoliberalism.”
You know that can be the title of a new book by a historian. 😛
Please can you produce a copy of the proposal for People’s QE in Easy Read? Easy Read uses words and pictures to make complex issues easy to understand.
The Bank of England’s economic policies should also be produced in Easy Read. One reason for the banking crisis was that boards of directors did not understand CDO’s and we need to help more people to understand the economics which is used today.
There is no reason why People’s QE and other economic policies should be a discussion amongst elites to the exclusion of people who do not understand complex economic arguments.
We are in touch -it is all about time…
You could try http://www.inspiredservices.org.uk.
They produce Easy Read documents for the Ministry of Justice.
It is really important to make economics understandable to people who are adversely affected by austerity.
And that’s before you get into the constitutional argument.
Even the courts can only constrain government. They cannot constrain parliament.
The House of Lords – as the second chamber – cannot constrain a parliamentary Finance Bill. That is what the 1910 constitutional crisis was about, and the introduction of the parliament act.
Yet CBI fans actually want a central bank that can say ‘no’ to an act passed by parliament. They want parliament to hand over sovereignty to the Court of the Bank of England.
And that’s supposed to be progress in a democratic state? No thanks.
‘The wisdom of the market’ sits with democracy, about as well as ‘being a little bit pregnant’.
Richard, this a good article on the forces you are up against and why “price stability” is so important to conservatives (excluding housing/asset bubble led growth where they capture a large share.)
http://www.interfluidity.com/v2/5561.html
So disengenous.
Show the whole and s19 and then admit your deception. This is why lefties like you are so despised.
But then not great news for your vacuous accolytes.
The rest simply puts time limits on use
I showed the operational parts
There is no deception: you just can’t read legisaltion: some of us can
So the Treasury can only tell the Bank what to do if there are “extreme economic circumstances”. What is the legal definition of “extreme economic circumstances”?
Also, “they” have to be satisfied that the directions are required. It is not clear if “they” is the Treasury, the Bank, or both. A lawyer might argue that “they” includes the Bank and if the Bank is not satisfied that the directions are in the public interest and/or there are not extreme economic circumstances then the Bank would not be legally required to do what the Treasury ordered. I could be wrong on this but my recollection of the grammar rule is that a pronoun (“they”) refers to the last subject mentioned, which in this case is the Bank.
I believe that you are right and the Bank is not independent, but I’m not sure the section you quote definitively shows that.
If ‘they’ refused I’d be passing emergency legislation in a minute
Simon
It’s a little more than clever lawyers can get around it by making clever arguments.
The parts of Section 19 not shown in the post require that an Order be placed before Parliament in the form of a Statutory Instrument, and that votes in favour be held in *both* Houses of Parliament within 28 days of the Order being made.
If that does not happen, the Order ceases to have effect at the end of 28 days.
Even if it does get through both Houses of Parliament, it still ceases to have effect after 90 days.
In other words, there are a lot of checks and balances.
This is the full text of Section 19:
=======================
“19 Reserve powers.
(1)The Treasury, after consultation with the Governor of the Bank, may by order give the Bank directions with respect to monetary policy if they are satisfied that the directions are required in the public interest and by extreme economic circumstances.
(2)An order under this section may include such consequential modifications of the provisions of this Part relating to the Monetary Policy Committee as the Treasury think fit.
(3)A statutory instrument containing an order under this section shall be laid before Parliament after being made.
(4)Unless an order under this section is approved by resolution of each House of Parliament before the end of the period of 28 days beginning with the day on which it is made, it shall cease to have effect at the end of that period.
(5)In reckoning the period of 28 days for the purposes of subsection (4), no account shall be taken of any time during which Parliament is dissolved or prorogued or during which either House is adjourned for more than 4 days.
(6)An order under this section which does not cease to have effect before the end of the period of 3 months beginning with the day on which it is made shall cease to have effect at the end of that period.
(7)While an order under this section has effect, section 11 shall not have effect. “
SIs invariably pass
And can invariably be renewed
Shall we get real here?
Absoluitely lets get real.
They are subject to consultation with those affected at Draft stage, and if a Minister abuses that process his decision is subject to Judicial Review and court action.
Respectfully, it’s not going to happen
Equally respectfully I’d continue to disagree.
Removing the independence of the BoE is not an everyday event.
Cheers.
Only in the minds of neo-liberals.
TBH I’d leave the matter in no doubt and simply repeal the relevant sections of the 1998 act. It serves no purpose after all in the real world.
We all know central bank independence is an attempt to enforce corporate control over parliament – much like TTIP and half the stuff that unfortunately ended up in the EU treaty.
And it’s all about limiting government’s power to call corporations and bankers to account and force them to act in the interests of the citizens of the country.
I would want to reform the Companies Acts as well
Neoliberalism died when the bank losses got socialised.
Perhaps it is more useful to consider whether Neofeudalism is more apt.
Do 0% interest rates better suit the debtees or debtors?
Other than the perfect pareto outcome of one entity owning everything, austerity has nothing to do with economics. It’s one of the reasons we need government.
The Strange Non-death of Neoliberalism (Crouch) is worth a read.