09 July 2018

Till Time’s Last Sand: A History of the Bank of England

David Kynaston
2018, Bloomsbury, 896 pages,
ISBN 9781408868577

Reviewer: Kevin Gardner, Economics & Intl Divisions, Bank of England (1982-86)

My day job involves grappling with a badly reported present and a profoundly unknowable future. By contrast, here is a treasure trove of clearly written, expertly marshalled and (mostly) incontrovertible facts from the past. 

Many of them can be cherished in their own right. An early Deputy Governor literally lost his head at work; a gun fired in the Bank almost deprived us of Toad of Toad Hall; one Governor described our favourite financial newspaper as a “second class sheet”. 

If I may add a footnote of my own: the Charles Dawes, whose eponymous Plan for German reparations features in Chapter 9, wrote a tune that became a hit for the Four Tops.   

Much of the account also has direct relevance today, though the author mostly leaves it to us to make the connections.

For example, the book reminds us that the popular caricature of a City of London riding to prosperity on the coat-tails of the industrial revolution puts the horse behind the cart, as it were. The City was a successful cluster long before we knew what such things were, and the Bank’s foundation in 1694 was part of a financial revolution that is often forgotten.

And London’s growth, presided over by the Bank, also owes less to European business than we might fear. 

It also reminds us that the distinction between monetary policy and banking supervision has been blurred since central banking began. It has to be: if the banking system implodes, so does modern money.

As far as the operation of that policy is concerned, we are reminded that UK monetarists and pragmatists clashed long before the IMF-led experiments of the 1970s. Writing of an episode more than two hundred years ago, Kynaston refers to “the belief – for some an almost messianic belief – that it was the quantity of money that determined prices” (p92). 

Economists feature as the narrative gets closer to the modern day.

The early well-known quip about Bank economics is here: “… we have appointed you as our economic adviser; let me tell you that you are not here to tell us what to do, but to explain to us why we have done it” (p358: Montagu Norman – the most colourful Governor of all in Kynaston’s account).

Bank economists themselves have not always been convinced of their methods: Christopher Dow, a chief economist himself (for whom I briefly worked when at the Bank in the early 1980s), suggested that “One could not but feel that there had been over-promotion… there seemed too great an emphasis on intellectual advice, as against intuition, practice and experience…” (p574)   

By the time of the most recent financial crisis, we find Mervyn King musing afterwards that “… there was so much paper produced that it was impossible to see the wood for the trees” (p740). Kynaston suggests “Few if any believed with more certainty that they had cracked it than the Bank’s new priesthood: the economists” (p747).

Hindsight is of course wonderful, and Kynaston does not really question the conventional journalistic account of the crisis and its aftermath. I found his account of Bank independence, and the creation of the MPC, more interesting.  

But the ascent of economics at the Bank is indeed a relatively modern development. And an excessive respect for a degenerating macroeconomic research programme was a characteristic of Bank economics during my short (and happy – for me at least) time there. 

As Kynaston notes, the analytical firepower of Bank economists is considerable. They seem to me, however, to be reluctant to use it to rock the sinking research ship – which is a pity, because their leadership and intellectual sponsorship might yet keep the curriculum afloat and set it sailing off in a more useful direction.

After all, as this book makes clear, it would be just another in a long line of successful Bank bail-outs.