Reading Critique for 10/13/98: Central Banks and Autonomy
- Maxfield offers an additional tool for analyzing developing countries'
integration into the global economy by measuring the degree of autonomy of
their central banks. Boylan contributes to Maxfield's discussion by arguing
that central banks may be strengthened in the wake of political transition
from authoritarian to democratic rule.
- Though it can be a helpful basic tool for analyzing developing countries,
Maxfield's and Boyner's proposition must be used carefully. It's
effectiveness to assess specific countries might be questioned. Few
exceptions and onsiderations are made for the many variables involved in
analyzing specific countries.
- Maxfield takes into account non-democratic regimes; however, she
marginalizes them and implies that central bank independence most likely
can be obtained in somewhat developed and stable democracies. Furthermore,
Maxfield seems to imply that central bank independence is the one of the
only rational reasons for investment. Though this argument seems to be
plausible, it inherently would contradict previous readings (specifically
Bertrand) which argued that governments don't necessarily need to be
democratic in order to liberalize.
- Maxfield mentions the technical training and expertise of the central
bank as necessary to gain authority. Yet she fails to mention the
availability of such native expertise in developing countries and what
countries should do when expertise is lacking. As a result, Maxfield
doesn't seem to recognize that some nations still don't have the tools
necessary (or in some cases, the desire) to move towards central bank
independence. In other words, Maxfield portrays a constant struggle in
every country over central bank independence where there might not be any.
- Maxfield seems to contradict herself when she argues that credibility is
a wanted characteristic to attract investors while at the same time
concedes that this is not the case in Russia, Asia and the Middle East. (At
the time of article's writing), Russia and Asia receive investment
regardless of credibility and the Middle East hasn't thus far sought
credibility.
- It is interesting to note that a non-democratic entity, the independent
central bank, seems to be necessary for economic stability and prosperity
in nations, especially in democratic nations.
- Both articles have an interesting undertone to them -- that society as a
whole, is unlikely to make or support wise economic policies and that an
independent central bank is necessary to do so. This is especially
interesting since both authors seem to be proponents of democracy.