Professor John Weeks has arranged for this letter to be published in the forthcoming Newsletter of the Royal Economic Society. The letter is signed by, amongst others: Ann Pettifor, Michael Burke, Geoffrey Harcourt and Ha-Joon Chang. The letter and its signees can be read below:
The prevailing ideology over the last thirty years has been that the only legitimate task of central banks everywhere is control of inflation. This has frequently been through the application of an “inflation target”, a maximum rate of increase of some measure of aggregate price changes. The practical consequence of setting the “fight against inflation” as the primary objective has been to reduce substantially the policy options of central banks. Even more, this narrow approach prevents the coordination of monetary policy and fiscal policy, essential to successful countercyclical interventions.
In Argentina in the 1990s economic policy operated under the burden of an extreme form of this narrow approach, a “currency board” regime, involving a fixed exchange rate to the dollar and a monetary base strictly linked to foreign exchange reserves. During 1997-2002 the weaknesses inherent in this monetary policy created disaster, economic collapse and high inflation.
In March of this year, the Argentine government proposed a new central bank mandate, that would repeal the currency board rules and broaden the institution’s mandate to multiple objectives including growth, more equitable distribution, sectoral credit allocation, and price stability. The Congress passed and President Cristina Fernandez signed it into law the new mandate.
We, economists working in the United Kingdom, applaud the Argentine government and the Congress for this farsighted approach to monetary policy. The new mandate allows the current and future governments to choose between wise and foolish economic policies, while the previous law institutionalized the latter.
Sarah Bracking, University of Manchester
Michael Burke, Socialist Economic Bulletin
Ha-Joon Chang, Cambridge University
Hulya Dagdeviren, University of Hertfordshire
Gary Dymski, University of Leeds
John Grahl, University of Middlesex
G. C. Harcourt, Cambridge University
George Irvin, SOAS, University of London
Annina Kaltenbrunner, University of Leeds
Costas Lapavitsas, SOAS, University of London
Terry McKinley, SOAS, University of London
Ozlem Onaran, University of Westminster
Gabriel Palma, Cambridge University
Ann Pettifor, Prime Economics
Malcolm Sawyer, University of Leeds
Kalim Siddiqui, University of Huddersfield
Guy Standing, University of Bath
Engelbert Stockhammer, University of Kingston
Jan Toporowski, SOAS, University of London
John Weeks, SOAS, University of London