Bank of England recently held an economic history workshop at the St Clere Estate, home of former governor Montagu Norman. The Bank of England blog – named as Bankunderground – has been reaching out to econ history scholars to wrote guest posts on the blog. This is fabulous as blog is a great medium to disseminate research ideas. There was an earlier guest post by Prof Barry Eichengreen on lessons from Montagu Norman. There is another superb post from Anne Murphy, Dean of Humanities and a professor at the University of Hertfordshire. She writes on how Bank of England archives can help us learn about organisational changes at Bank of England itself: Industrialisation was not the only driver of change during the eighteenth century. Recent historiography has revealed more about the
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Bank of England recently held an economic history workshop at the St Clere Estate, home of former governor Montagu Norman.
The Bank of England blog – named as Bankunderground – has been reaching out to econ history scholars to wrote guest posts on the blog. This is fabulous as blog is a great medium to disseminate research ideas. There was an earlier guest post by Prof Barry Eichengreen on lessons from Montagu Norman.
There is another superb post from Anne Murphy, Dean of Humanities and a professor at the University of Hertfordshire. She writes on how Bank of England archives can help us learn about organisational changes at Bank of England itself:
Industrialisation was not the only driver of change during the eighteenth century. Recent historiography has revealed more about the financial and organisational revolutions that helped to shape the British state and the country’s economic development. The Bank of England was at the forefront of these revolutions and a pioneer of new modes of business organisation. A business that started out in a small rented space with only seventeen clerks in 1694 was, by 1815, employing nearly 1,000 workers and occupying most of the Threadneedle Street block. Yet it has been sadly neglected as a case study. What might we find in the Bank’s archives to understand how business adapted to rapid and radical change during the eighteenth and nineteenth centuries?
Our first insight actually comes from the extent of that archive. One response to changing organisational priorities was to accumulate information. The need to maintain comprehensive and accurate records meant that the Bank kept nearly everything. So vast was the undertaking that by the 1770s it had to invest in a four-storey fire-proof library. And many of the records preserved there have survived. Look further into the archive and it is possible to gain insights into how a new business model evolves, how a workforce adapts and how an institution conveys trust in a rapidly changing environment.
How the central bank dealt with several challenges such as record keeping, fire, human capital, building bills market and so on…
This one on bank creating trust:
…..the Bank’s directors were keen to signal their connection to the state. Britannia was particularly prominent throughout, stamped on the Bank’s notes, ledgers and letterheads and as a statue over the entrance to the Pay Hall. With her shield and spear signalling defence of the nation and close associations with trade, industry and profit Britannia offered a clear statement of the Bank’s aims and the conflation of those aims with the goals of the state. But this message was an uncomfortable fit with the Bank’s willingness to house a market that was often criticized for its supposed attempts to undermine the nation’s stability and for taking advantage of the exigencies of war.
Britania stamp. Source: Bank of England Archive.
The contradiction was dealt with by the creation of both physical and business separation between the work of managing the public credit and the business of trading the government’s debt. It was not wholly successful, as the transfer clerks’ business sidelines demonstrate. We might ask, therefore, to what extent the Bank could be trusted to serve its two masters: the state, which expected the cost-effective and reliable management of its debt, and the public who lent to the state and expected the Bank to safeguard their investment.
This question is of great importance to historians who seek to understand why the public was willing to lend, throughout the long eighteenth century, to a state so often at war. It has been answered by many scholars with reference to the institutional changes brought about by the Glorious Revolution of 1688.
The role of the Bank in this process was key and the location of the market within its walls did not serve to undermine, but rather to enhance what has been referred to as a ‘credible commitment’ to honour the state’s financial promises. It made the market easy to locate and accessible. It allowed the visitor to the Bank to observe all the processes of providing public credit. Indeed, the Bank was undeniably a space in which public credit was put on display and the financial integrity of the state was demonstrated. From its grand architecture to the open-plan arrangement of the offices to the Rotunda where the brokers and jobbers gathered, visitors were invited to witness public credit at work.
Arguably then, despite all the potential disadvantages of locating the market within the Bank, some wider and more important purposes were realized: those of exposing the functioning of the market in the state’s debt to scrutiny and demonstrating the credibility of public credit. ‘Credible commitment’, therefore, did not just reside in state institutions that might have seemed rather nebulous in the eyes of most public creditors. By the mid-eighteenth century ‘credible commitment’ could be found and observed at the Bank of England. There, credibility lay in the provision of liquidity and a one-stop-shop in which all business relating to the public debt could indeed be done quickly and easily.
Really good stuff..
In the battle between RBI and government, it is high time we look at RBI as an organisation and not just its policies. That will tell us many things we are missing in the debate. After all, RBI is one of the few central banks which has been speaking about lack of independence for a long time. No other central bank complains that much. So is there an organisational design in RBI which has gaps which allows governments to always question the central bank? If yes, how should it be fixed?