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16 September 2009

The “overbearing tyranny“ at the Bank of England

Blanchflower v King, Round Three

By Mehdi Hasan

Round One, you may remember, in the very public row between Professor David “Danny” Blanchflower, a former independent member of the Bank of England’s Monetary Policy Committee and the new weekly economics columnist here at the New Statesman, and Mervyn King, governor of the Bank of England and one-time hawk on interest rates, kicked off on the pages of this magazine last week. In an exclusive article for the Statesman to coincide with the first anniversary of the financial crash, Blanchflower claimed that his old boss on the MPC ruled the Bank of England with an “iron fist”, crushed dissenting voices and encouraged the “tyranny of consensus”.

Round Two commenced yesterday in front of the Treasury select committee, where the Bank of England governor was forced to defend himself against Blanchflower’s attack. “You can decide for yourself whether I do or do not have this iron fist, but look at the voting record,” he said. And, as my colleague George Eaton pointed out on his blog yesterday: “King repeated his claim that earlier cuts in interest rates would not have diminished the force of the financial crisis and argued that no one could have foreseen the size of the recession.” He also attacked Blanchflower’s decision to publish his insider account in the New Statesman as “unwise and not sensible”, and said that “Danny’s recollection of events does not coincide with mine”.

Round Three has now kicked off in earnest, after I asked Professor Blanchflower this morning for his response to the governor’s comments. “I guess my main reaction is to say that it is the role of an independent member to speak up in the interests of the British people,” he told me. “I disagreed with the overbearing tyranny.” He added: “People are too scared to speak up.”

On the governor’s claim that earlier rate cuts would have been pointless, the professor is scathing. “If, as King argues, cutting rates earlier would have done little, then I guess his view is that we do not need an MPC at all, as it is, according to his view, entirely powerless.”

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What about his decision to go public with criticisms of his former colleagues at the Bank, including his explosive article in the NS? Was it the right thing to do? “It’s what the British people should expect from an independent member [of the MPC],” he said. “I realised the MPC had made a mistake that needed correcting, so I spoke up.

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“With hindsight, it turns out I was right to do so.”

Over to you, Mervyn . .