Central bank targets are arguably the current way late capitalist economies try to keep a correspondence between the total supply of money, and the total amount of exchange value, to use marxist terminology.
Gordon Brown's surprise move immediately after the Labour Party general election victory, to set up a monetary policy committee of experts to guide the Bank of England's interests rates, appears to have been politically successful. It has avoided the Chancellor being buffeted by political campaigns from different interest groups, eager to blame him for any decision he would make about interest rates. Economically it appears to have provided a subtle feedback system which has avoided surprises as a result of the routine of monthly meetings, pre-meeting second guessing, and post mortems.
But there is now debate about the terms of the remit. The Bank of England monetary policy committee was given a target of one percent either side of an inflation rate of 2.5% only. However in practice attention is now switching more to issues of whether the British economy could sustain a little more growth without rising inflation.
The European central bank has a differently set target of inflation less than 2%. It is suggested that it is also constitutionally allowed to take into account other factors, but I have not heard exactly how this is spelled out.
The US admirers of Greenspan claim that the remit of the Fed is less restrictive and has allowed the US economy to be guided (also by consciously public tiny nudges) to a target of the lowest unemployment rate consistent with not increasing inflation.
What is common to these approaches is the process of apparently making purely technical the feedback system for adjusting the money supply of a whole economy through interest rates. Also the avoidance of surprise, to permit the maximum factoring in of any changes of however small a degree. In terms of systems theory this reduces the risk of shocks. In terms of class interests it favours the largest financial companies who are the only ones who can benefit by switching large volumes of money from one category to another for the sake of a fraction of a percent difference in interest rates.
But these central bank methods of managing the money supply cannot be realistically compared without considering other features of the different economies, such as the "flexibility" of the US labour market with its wide span in wage rates, the subsidies the US gets from the rest of the world as the owner of the world reserve currency, and the unusually high interest rates in Britain (possibly associated among other things with the high preportion of the housing market owned privately by people taking out state subsidised mortgages).
Some would object to discussing central bank targets on the grounds that it is all part of the capitalist conspiracy to run society in the interests of capital. True. But they are also part of the preparations of the capitalist mode of production for the abolition of private ownership of the means of production. Control of finance capital is core to this, and even if methods of subtle negative feedback are developing by stealth, that is no reason why we should not analyse them to work out what is in the interest of working people, what is in the interests of the dominance of living labour over dead labour.
In my summary, I must have got some things wrong or at least misrepresented their importance. Comments appreciated.
Chris Burford
London