4 And the Thatcher government, elected shortly afterwards, failed to command broad-based support for a medium-term framework for reducing inflation explicitly founded on “monetarism”, which became a loaded term, widely perceived across UK society as part of an ideology. In other words, sound money or price stability was not viewed as an objective that could be shared across the democratic political spectrum. 5  1  See Chapter 2 in Blinder, A. S., 2004, The Quiet Revolution: Central Banking Goes Modern, Yale University Press. 2  Lombardelli, C., J. Proudman and J. Talbot (2005), “Committees versus individuals: an experimental analysis of monetary policy decision making”, International Journal of Central Banking, May 2005. 3  “The operation of monetary policy since the Radcliffe report: text of paper presented at a conference “Radcliffe – ten years after”, Bank of England Quarterly Bulletin, volume 9, number 4, 1969. 4  Burk, K. & and A. Cairncross, 1992, "Goodbye, Great Britain": the 1976 IMF crisis, Yale University Press. 5  I say democratic, because enemies of democracy have seen debauching the currency as a means to their ends. For example, “The best way to destroy the capitalist system is to debauch the currency” is attributed to V. I. Lenin by J. M. Keynes in The Economic Consequences of the Peace, 1920, p. 235. BIS Review 66/2007  1  This was, perhaps, apparent in the famous 1981 letter of the 364 economists which stressed that “the time has come to reject monetarist policies”.
As a further gloss on that piece of history, I should perhaps disclose that, working to Eddie, Mervyn and the then DG , Howard Davies, I was the Bank official who “held the pen” during that work. 21  As stated in Balls, E and G. O’Donnell, 2002, Reforming Britain’s Economic and Financial Policy, “The role of the Chancellor in appointing the four outsiders was part of the delicate constitutional balance that was struck in a move towards a legitimate model of central bank independence consistent with British-style accountability to Parliament.” (page 99)  4  BIS Review 66/2007  This is what I have been leading up to: an “individualistic” committee was a necessary condition for operational independence in the UK. In terms of solving the time-consistency problem and establishing credibility, the UK system does not rely on handing monetary policy, lock, stock and barrel, to a group of “conservative central bankers”; in terms of the literature familiar to this conference, the system is as much Walsh as Rogoff. 22 The regime is based on combining an objective set by democratically elected politicians, with clear accountability mechanisms. One of those mechanisms was triggered for the first time recently when CPI inflation rose to 3.1% in March, requiring the Governor, on behalf of the Committee, to write an open letter to the Chancellor about what we thought was going on and what we planned to do to get inflation back to our target of 2%.