Archive for November 13th, 2018

How German women obtained the right to vote 100 years ago?

November 13, 2018

Women won the rights to vote in Germany on 12 Nov 1918.

Here is brief history of how it happened.

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How did organisations adapt to change in the 18th and 19th century: Case of Bank of England

November 13, 2018

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?

If investors care for central bank independence, why does investment flow to China?

November 13, 2018

Manas Chakravarty has a nice piece in Mint:

Economic affairs secretary Subhash Chandra Garg’s tweet in reply to RBI deputy governor Viral Acharya’s hard-hitting speech was widely deplored, but he did have a valid question. To what extent are investors really bothered about central bank independence? If they are, what explains the flood of money that entered China, where the central bank doesn’t even pretend to be independent?

In fact, central bank independence has been in vogue only for the last 30 years. Not everybody is enamoured of it. Some academics have argued that rather than being truly independent, central banks have become handmaidens of international finance. Some have alleged central bankers pursue independence as a means of gaining power and prestige. Critics have said that the increasing emphasis on central bank independence is the result of the power of the financial sector to assert its interests, or the interests of creditors, over those of households and debtors, as inflation targeting results in the redistribution of real income from debtors to creditors. Fingers have been pointed to the rise in inequality in recent decades as a result of central bank policies that have led to huge gains for asset markets. In short, central bank independence is closely bound up with the rise to global pre-eminence of the financial sector.

…..let’s get back to the example of the Chinese central bank. It is unabashedly an arm of the Chinese state and the prime instrument of the government’s financial repression. It is partly because of its lack of independence that China is sitting on top of a volcanic mountain of debt, a mountain that now threatens to blow its top. However, foreign investors in China were not really bothered about the credibility of its central bank. They banked instead on the credibility of the Chinese government and its track record in managing extraordinary economic growth.

It is, therefore, an empirical matter whether investors repose confidence in the central bank or in the country’s government. In Turkey or Argentina, investors would no doubt prefer central bank independence. In China’s case, they seem to believe it doesn’t matter, as they rather ironically seem to have immense faith in the ability of the Chinese Communist Party to deliver the goods.

The question is: Is the Indian central bank or the Indian government more credible to the financial markets? Whom do they trust more?

Hmm..

Bitcoin turns 10: An idea that shook the world monetary order

November 13, 2018

My new piece in moneycontrol: Bitcoin turns 10: An idea that shook the world monetary order.

 

World War I Centenary: The Morning of November 11, 1918

November 13, 2018

Nice piece by T. Hunt Hooley (teaches History at Austin College).  He is the author of The Great War: Western Front and Home Front.

On the morning of November 11, 1918, fighter pilot and leading American ace Eddie Rickenbacker quietly ambled to the hangar of his aerodrome in France. The night before, in anticipation of the Armistice, all Allied flights were grounded. But Rickenbacker was not known as a rule-follower. He told his crew to roll out his SPAD XIII fighter plane “and warm it up to test the engines.” He climbed into the cockpit, took off, and headed to the trenches of the Western Front. Low clouds kept him low, around five hundred feet. He could see flashes of rifle and machine gun fire from the German trenches.

And then it was 11:00 A.M., the eleventh hour of the eleventh day of the eleventh month. I was the only audience for the greatest show ever presented. On both sides of no-man’s-land, the trenches erupted. Brown-uniformed men poured out of the American trenches, gray-green uniforms out of the German. From my observer’s seat overhead, I watched them throw their helmets in the air, discard their guns, wave their hands. Then all up and down the front, the two groups of men began edging toward each other across no-man’s-land. Seconds before they had been willing to shoot each other; now they came forward. Hesitantly at first, then more quickly, each group approached the other.

Suddenly gray uniforms mixed with brown. I could see them hugging each other, dancing, jumping. Americans were passing out cigarettes and chocolate. I flew up to the French sector. There it was even more incredible. After four years of slaughter and hatred, they were not only hugging each other but kissing each other on both cheeks as well.

Star shells, rockets and flares began to go up, and I turned my ship toward the field. The war was over.

In memoirs, diary entries, and letters, we find that for the fighters of the First World War, the Great thing about the War was its end. In victorious countries, schools let out, impromptu parades and rallies erupted. These outbursts recognized victory, to be sure, but they chiefly celebrated the end of the war. My own grandmother recounted to me, more than once and each time luminously, the ecstatic celebration in her little town of Murray, Kentucky, where school was cancelled and virtually everyone in town gathered in the courthouse square to celebrate. In my recollection, she never mentioned the word “victory” once. In Rickenbacker’s squadron, everyone from pilot to cook joined in a mad celebration, but not of victory, “many of them shouting ‘I survived the war! I survived the war!”

 

50 years of Gunnar Myrdal’s Asian Drama: History of Indian economy since 1968…

November 13, 2018

Swedish economist Gunnar Myrdal published his book – Asian Drama- 50 years ago in 1968.

Prof Kaushik Basu reviews India’s economic history since 1968 in this paper:

This paper is a short history of the Indian economy since 1968. India today is a changed country from what it was half a century ago, when Myrdal published his Asian Drama. The stranglehold of low growth has been broken, its population below the poverty line has fallen markedly, and India has joined the pantheon of major players globally. This paper analyses the economic policies and the politics behind this transformation; and uses that as a backdrop to take
stock of the huge challenges that lie ahead.

Here is another piece from Prof Ravi Kanbur:


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