Meet the most powerful woman in banking

Yellen is a distinguished academic, especially known for her work on unemployment. She has even written about out-of-wedlock child-rearing, gang behaviour and the brain drain; she cares about the real world and her work involves careful analysis of behavi

The nomination of Janet Yellen to be the next chair of the US Federal Reserve is an excellent one, especially with all the uncertainty over the US government shutdown and fears over breaching the debt ceiling. The US economy needs continuity in its monetary policy and Yellen, whom I supported for the job, guarantees a seamless transition from Ben Bernanke. Best of all, it’s one for the doves. She will have no trouble at all being confirmed by the US Senate, even though folks such as Rand Paul will vote against her because they don’t believe there should be a central bank. She needs only 60 out of 100 votes to be confirmed, and will be.

The appointment of Professor Yellen has been welcomed by economists no matter what their economic persuasion, Keynesian or monetarist, saltwater (Harvard) or freshwater (Chicago). There have been few if any dissenting voices. Her CV is second to none. She is definitely the number-one central banker in the world; Mark Carney was just the best central banker available in the banker draft when George Osborne chose him to lead the Bank of England.

Yellen, who is only five feet tall, obtained her PhD from Yale, where she was supervised by the Nobel economics laureate James Tobin. She taught at Harvard and the LSE before moving to the University of California, Berkeley. She first worked at “the Fed” as an economist in the 1970s and then returned as a governor from 1994-1997, when I met her as a feisty but “small lady with a large IQ”, as the New York Times has said. She was chair of Bill Clinton’s council of economic advisers from 1997-1999.

From 2004-2011 Yellen was the president and chief executive of the Federal Reserve Bank of San Francisco and, as the 12 bank presidents do, attended Fed rate-setting meetings. In 2010 she returned to the Fed as a governor and vice-chair. She is married to the Nobel economics laureate George Akerlof; they have a son who is an economist at the University of Warwick.

Yellen is a distinguished academic, especially known for her work on unemployment. She has even written about out-of-wedlock child-rearing, gang behaviour and the brain drain; she cares about the real world and her work involves careful analysis of behaviour.

The new Fed chief is especially concerned about long-duration unemployment and its consequences. Her view is that, for now, inflation can go on the back burner –which is music to my ears, given my recent work showing that a 1 percentage point increase in unemployment lowers well-being by over four times as much as an equivalent increase in inflation.

Yellen has been influential in developing the forward guidance on interest rates that the Bank of England has copied. There will be no rate rises any time soon on her watch unless something dramatic and good happens. I couldn’t ask for better than that.

Pint-sized engagement, going all the way to the top: Janet Yellen, the world's top central banker. Image: Getty

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

This article first appeared in the 17 October 2013 issue of the New Statesman, The Austerity Pope

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The clever ideological trick that could save the Labour party

The Co-operative party could suddenly get a lot more popular. 

It’s do or die for the party’s moderate MPs, who have lost the fight for the soul of Labour and must quickly move on. 

The 172 Labour MPs who backed a no-confidence vote in Jeremy Corbyn earlier this year may not like their newly elected party leader much, but they loathe John McDonnell. 

So it is little surprise that one of them, John Woodcock, reportedly looked “sick to the stomach” when the Shadow Chancellor tenderly invited him for a cuppa in his office following the leadership election result at conference. Reading the tea leaves tells me those talks aren’t going to go well.  

Yet moderate MPs would do well to revisit McDonnell’s off-the-cuff comments from a few years back: “I’m not in the Labour party because I’m a believer of the Labour party as some supreme body or something God-given or anything like that,” he told a small audience in 2012. “It’s a tactic. It’s as simple as that. If it’s no longer a useful vehicle, move on.” 

Two feather-spitting former frontbenchers called for McDonnell’s resignation when these comments emerged in March, saying they revealed his Trotskyist tendencies. "The context (a hard-left gathering) and the company (which included Gerry Downing, expelled from Labour for his comments on 9/11) didn’t make for great publicity, no," a Leader’s Office staffer privately confesses. 

But McDonnell is right: There is nothing necessary, natural or divinely ordained about Labour’s existence lest it can get things done. Which is why the parliamentary Labour party cannot botch its next attempt at power. 

In the wake of Corbyn’s re-election, Labour MPs face a fork-in-the-road: fight this civil war until its bitter end - play the long game, wait until Labour loses the next general election and challenge Corbyn again - or start afresh. 

It is a bleak, binary choice, akin to a doctor delivering test results and declaring the illness is terminal as feared: the patient can go down fighting and die a slow death, notwithstanding a medical miracle, or instead take part in a pioneering new drug trial. This carries the risk of dying immediately but promises the possibility of life as well. Both options are fraught with danger.

The problem with the first option is that moderates have all but lost the party already. A poll reveals Corbyn won 85 per cent - 15 per cent among members who joined after he became party leader and lost 37 per cent - 63 per cent among those who were members of the party before the last general election. The result: victory by 119,000 votes. 

Corbyn has already announced he wants to give these foot soldiers far greater firepower and told Andrew Marr he had asked the NEC to draft plans for increasing the membership and including it in “all aspects of party decision making”. Labour is transitioning apace into a social movement: free of formal hierarchy and ambivalent about parliamentary power. 

So why wait until 2020? There is every chance that MPs won’t any longer have the power to challenge to Corbyn within four years’ time. If Momentum has its way with reselection and shadow cabinet elections, leading rebels may not be around to begin with. 

Even if MPs mount another leadership challenge, few believe organisations like Saving Labour or Labour First could put together a sizeable enough electorate to outgun Corbyn at the ballot box. He would be voted back in by a landslide. 

The alternative is for MPs to create a new centre-left force. The main plan under consideration is to join the Cooperative party, Labour’s sister party, and sit as a bloc of “double hatted” MPs, with their own policy agenda on Brexit and the economy. This new bloc would apply to the Speaker to become the official opposition. 

Plenty of MPs and members recoil at the idea of a semi-split like this because of the mixed message it would send to voters on the doorstep. "So you don’t have faith in Corbyn, but you’re a Co-op MP campaigning on behalf of his Labour?" Many believe a full-split would be worse. They fear being pitted against Corbyn-backed Labour candidates in local constituencies and splitting the left vote, opening the door to Ukip or the Conservatives in marginal seats. 

But if moderate MPs mean what they say when they warn of total electoral wipeout in 2020, risking a new centre-left grouping is intuitively worth it.  What do they have to lose? And how many more times can Labour’s moderates cry wolf - Labour "risks extinction", Sadiq Khan said yesterday - until voters call their bluff and tell them to quit complaining and fall in line behind their leader? 

While Corbyn’s polling remains disastrous, a Co-op/Labour party would boast a mandate of 9.3m people, a policy agenda in line with Britain’s political centre of gravity and a chance of becoming the official opposition: a risk worth taking in the face of electoral oblivion. 

A handful of battle-bruised MPs are talking about coming together. "Time to unite," a deflated Hilary Benn tweeted this weekend. There is a precedent for this: first past the post means the party has always been composed of uneasy coalitions of different groups - take the trade unionists, liberal cosmopolites and ethnic minorities of the New Labour years - and it is arguably no different now.  

Yet this is not about a coalition of diverse interests. It is about two parties within a party, each of which believes Labour is their rightful inheritance. Of the two, moderates are least likely to gain anything by engaging in an all out war. It is time they took a leaf out of McDonnell’s book and accepted it is time, regrettably, "to move on". 

Gabriel Pogrund is a journalist at The Sunday Times and a Google News Fellow 2016.