“A family portrait not too stale to record
of a pleasant old buffer, nephew to a lord,
who believed that the bank was mightier than the sword,
and that an umbrella might pacify barbarians abroad:
just like an old liberal between the wars.”
People in business across the United Kingdom will be aware of one of the key activities of the Bank of England: taking the economic pulse of the country. In each region, there is a group of ‘agents’ who carry out this essential function, probing business activity and opinion and feeding back to the Monetary Policy Committee with its vital role of setting interest rates.
Central banks are a key part of maintaining currency stability but, in the long run, they cannot carry out that function without complementing central Government policy. That’s why the European Central bank struggles so much with the euro, as there is no central government policy for the Eurozone to even up wealth imbalances, and little evidence of it checking the economic pulse across its broad regional span.
The Bank of England’s agents are deeply experienced: they listen well, and communicate well. However there is much more that they could do in order to keep HM Treasury and BEIS better informed on economic conditions; and this week we look at some of the improvements which could be made, together with the growing interest in crypto-currencies.
Last Tuesday evening I attended a gathering of the Bank of England’s south-east team of agents, led by the redoubtable Phil Eckersley. It was, as always, a good mix of people from manufacturing, commercial, property and financial backgrounds. The conversation flowed from varying experiences of economic activity, Brexit preparations in the event of a ‘no deal’, to views about interest rates. Discussion continued for nearly two hours among the nine people present, and some of us are looking forward to a feedback session from the Bank in mid-July.
Each time I take part in one of these gatherings, I am struck by the quality of the conversation and the extent to which the agents listen. However it’s clear that, with the exception of the occasional feedback session with Government, there are no regular working-level feedback briefings with civil servants from HM Treasury or BEIS.
Government would hugely benefit from such briefings. In my experience, politicians and their civil servants are not particularly good at listening - or indeed replying to correspondence. As was evident when Philip Hammond commented on the UN special rapporteur’s report on UK poverty, views tend to be formed by their personal and anecdotal experience, which cannot be that broadly based when you’re driven around in a Government limo.
The other problem is that economists only focus on aggregates and averages, not on the relative standard of living across different communities. The only think-tank which comments regularly on the impacts of, say, Universal Benefits is the Institute of Fiscal Studies. An analysis of social welfare could do with similar attention to detail as the economics analysis undertaken by the Bank of England’s agents and, in our conversation last Tuesday, we moved on to these issues, and the challenges facing young people.
Perhaps the ultimate opportunity for political grandstanding is at the G20, and the last few days have seen quite a bit of that. The reaction to Putin’s comments about liberalism was predictable, and Donald Tusk lost no time in tweeting his abhorrence for authoritarianism, personality cults, and the rule of oligarchs.
But the liberal centre ground has lost touch with the people, because it has become so focused on regulations that individual freedom and participation has become smothered. People support populists because they think that centre ground politics are out of touch. As a result we have the dichotomy whereby those with the policies most designed to help the disenfranchised and disadvantaged have no popular appeal, whereas those who appear to connect best - and this includes Messrs. Trump and Putin - nurture policies which make life very difficult for those just about managing.
That’s why we need to find a new centre ground in politics, based on a egalitarian capitalism: designed to bring hope and opportunity to all, and particularly the disadvantaged young.
But to return to central banks and currencies: last week we were also greeted with the news that Facebook is about to introduce its own crypto-currency, the Libra, and the price of Bitcoin continued its wild ride in response.
For those who wonder when - if ever - crypto-currencies will be safe, I would say that the key arbiter is endorsement by the central banks and, in particular, the Bank of England. Personally I feel this is unlikely, and that these strange stores of value will remain the preserve of money launderers and tax avoiders. If there is one area where we do need reliable regulation, it is with everyday currencies. It has served Britain well to stay with the £ Sterling, and we have the Bank of England to thank for the stability it provides.
Gavin Oldham OBE