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[FOUNTAIN]A golden age for central bankers?

Published: 25 Apr. 2004, 21:58

Milton Friedman, professor emeritus of the University of Chicago, forecast that central banks would become “armies with only a signal corps.” He predicted that the role of the central bank would shrink dramatically because of the expansion of non-banking financial services such as securities and insurance that are outside the central banks’ control, and the introduction of new, electric forms of payment. But in fact, we can call the post-1990s era the “age of central bankers.”
Chairman Alan Greenspan of the Federal Reserve, the U.S. central bank, has more clout than the president when it comes to the economy. History shows that countries with independent and competent central banks have sustained more stable economic development than countries without such banks. Today, central banks have unprecedented power and influence.
The Monetary Policy Committee, the highest policy-making body in the Bank of Korea, regained its name right after the 1997-98 Asian financial crisis. The committee was formed in 1950, but the authoritarian government changed its name to the Monetary Policy Operation Committee in 1962. The word “operation” suggested that the committee did not make the policy decisions, but only enforced policies. The government wanted to weaken the central bank’s independence so that it could have absolute authority over economic development. Kim Byung-joo, professor emeritus of Sogang University, recalled that the Bank of Korea at that time was an “unwanted guest” under the finance ministry, and the committee was a servant of the government. The committee regained its name, and has full-time members.
But the recent controversy over appointments has put the committee in the spotlight. There are rumors that the committee was carefully composed, based on the members’ gender and regional and academic backgrounds, while the first choices nominated by the Ministry of Finance and Economy and the Bank of Korea were largely rejected.
Critics say consideration based on gender and background was unreasonable and only the best economic and financial specialists should be named to the committee. But such criticism does not matter much for those who believe that the Bank of Korea has already become an “army with only a signal corps” or those who see the committee as a servant of the government.

by Lee Se-jung

The writer is an editorial writer of the JoongAng Ilbo.