A global market in central bankers

Mark Carney (Getty)If anyone should understand the benefits of open markets, it is a central bank. The Canadian Mark Carney’s appointment as Bank of England governor (unexpected, mainly because he had said he wasn’t interested) is a significant step even for a country that has had German, Swedish and Italian national football coaches, a Zimbabwean national cricket coach and various Dutch and German heads of state.

But it is not unprecedented. The Bank of England (more accurately HM Treasury, which makes these appointments) has form in bringing in foreigners. When the Bank was made independent in 1997, two of the first appointees to its new monetary policy committee – “external members” in more ways than one – were Dutch-born Willem Buiter and American-born DeAnne Julius. As it happens, both also hold UK citizenship (and Carney, whose wife is British, will also take British nationality). But Adam Posen, who completed a three-year term as an MPC member this September, remained a US citizen throughout. There are also plenty of non-Brits at a staff level: the Bank sent Jens Larsen, a Dane, to represent the UK at the International Monetary Fund for two years.

Indeed, among the people least likely to care about Carney’s nationality are the bank’s staff. I was a BoE economist back in 1997 and the national origins of the MPC members, while they might have been interesting to the odd member of parliament, were regarded as pretty much irrelevant. (Their views on the natural rate of unemployment and the value of monetary aggregates as a guide to nominal demand, on the other hand, were earnestly and lengthily debated here.)

Nor does there seem to have been much nativist backlash among the public. Adam Posen in particular had strong views on monetary policy, being an early advocate of quantitative easing (comprehensively winning the argument in the end, though it was a minority view for a long time) but did not encounter much if any questioning of what an American was doing setting UK interest rates.

Nor is this phenomenon confined to the UK, nor is it one-way traffic. Stanley Fischer, born in what was then Northern Rhodesia but is now Zambia, had already adopted US citizenship (which enabled him to become second-in-command at the IMF, a de facto American fiefdom) before taking Israeli nationality to become governor of the Bank of Israel in 2005. Ian Plenderleith, the BoE’s former markets director, went to become deputy governor of the South African Reserve Bank in 2003.

Economics has long been a international discipline, with few natural barriers to trade: for one thing, it is pretty much all conducted in English and algebra. And since central banking became much more complex after the global financial crisis, with macroprudential regulation coming back into fashion, the right skill-and-experience mix has become rarer and more valuable than the right accent. Sometimes, the lack of a track record on domestic policy can be a bonus. Another contender for BoE governor was Adair Turner, who shares Mr Carney’s zeal for tougher financial regulation but was an early and strong advocate of the UK joining the euro, not a popular position in Britain these days.

The market is far from perfect: it is hard to imagine a foreign chairman of the US Federal Reserve being treated with anything other than astonishment in certain quarters on Capitol Hill, where even the current incumbent is regarded as treasonous. (Given the much deeper bench of first-rate academic economists in the US, the imperative in any case isn’t perhaps quite the same.) But I have two predictions:

1. The global trade in central bankers is only going to get deeper and more liquid

2. Whatever controversy Carney generates as governor, it is going to focus overwhelmingly on his policy rather than his passport.