Gordon Brown Wants a New Governor of the Bank of England, Some One with a Rare Blend of Qualities. Could the Solution Be Staring Him in the Face?
Fleming, Stewart, New Statesman (1996)
The idea that two politicians as hungry for office as Tony Blair and Gordon Brown would, once they achieved it, blithely hand over some of the strongest levers of economic power to a bunch of civil servants in Threadneedle Street always looked a bit suspect.
So when Eddie George, governor of the Bank of England, was told by the Chancellor that the Bank would have independent power to set interest rates, he would have been wise to delay cracking open a bottle of champagne.
In the event we have not had to wait long to see doubts creeping in. The process by which Brown subsequently announced that the Bank should be shorn of its role in regulating the banking sector has raised questions about just how independent he really wants the Bank of England to be. An angry George briefly considered resignation, after being given a brusque 24 hours' notice of this second decision, believing he had been assured no such thing would happen without prior consultation.
Normally well-informed journalists are writing that Gavyn Davies, chief economist of the US investment bank Goldman Sachs and a former adviser to James Callaghan, is pencilled in as George's successor. Fuel for the theory was provided by Davies' semi-detached appearance this week at the Goldman Sachs-Institute of Fiscal Studies Green Budget presentation.
All this does not look exactly like a vote of confidence in "steady Eddie". Worse, it risks fostering the dangerous idea that what we have here is a plot to rid the new government of a turbulent high priest of monetary restraint.
This is not to underestimate Davies. You do not get to the top of Goldman Sachs, a hard-nosed meritocracy, without having the brain and the brawn to punch your weight. The problem is that the handling of relations between the Bank and the new Chancellor has created the perception that Brown may be ready to appoint party loyalists to key positions, which is a big problem where those positions require, as a matter of high principle, unshakable independence.
It is deeply politically incorrect to add at this point that Davies is married to Sue Nye, Brown's long-time personal assistant, but it's a certainty that this very point has been noted already by every finance minister, central banker and financial dealer in the world's markets. In personal terms it may be unfair, but bitter experience has taught the markets that cosy relationships between governments and central banks may be all very well when a nation's economy is swinging along vigorously, but at moments of crisis they tend to undermine confidence.
When Karl Otto Pohl became president of the German Bundesbank in 1980, after leaving Helmut Schmidt's government, he distanced himself from his political allies both to reassure his new buddies in Frankfurt and to make clear to the financial world that he was nobody's lapdog. …