15.03.2005
Transcending Politics: A New Stage in Management
Transformation?
The Scientization of Central Banking as Case
Paper prepared for the SCANCOR/SOG Workshop on “Autonomization of the State: From
Integrated Administrative Models to Single Purpose Organizations”, Stanford University, April 1-2.
Martin Marcussen, Ph.D.
Associate Professor
International Center for Business and Politics
Copenhagen Business School
Steen Blichers Vej 22
2000 Frederiksberg
Denmark
Tlf: +45 3815 3595
mm.cbp@cbs.dk
1
Martin Marcussen, March 2005
Transcending Politics: A New Stage in Management
Transformation?
The Scientization of Central Banking as Case
ABSTRACT
Central banking is going through a period of transformation. To an increasing intent
the very function of conducting monetary and financial policy is now being
considered as a scientific discipline that transcends the field of politics. The paper
holds that this scientization of central banking constitutes a step beyond the more
general movement towards autonomization that has characterized public
administrative reforms in the 1990s.
A SECOND GENERATION OF MODERNIZATION?
The ‘modernization’ processes that took hold in public administrations during the last two decades
had an enormous impact on central banking. Particularly during the 1990s central banking almost
everywhere changed its formal status from being an integral and integrated part of the public
administrative apparatus to being legally autonomous from political interference. This process of
autonomization has had as a consequence that central banking has consolidated its power and status
in the national and transnational macro-economic organizational fields. However, during the last
few years there are signs that the conception of central banking has developed even further so that it
will be possible to talk about a second generation of modernization.
There are various strategies that can be applied to increase the autonomy of public bureaucracies
(Flinders and Buller, 2005). In this paper, ‘Autonomization’ refers to an administrative reform
process where trunks of the administrative apparatus receive a legal status that prevents politicians
from intervening in the ways in which the bureaucratic agency in question conducts its business
(Christensen and Lægreid, 2005). These new autonomous agencies are still part of the political
2
Martin Marcussen, March 2005
system and they are supposed to deliver public goods and services, but through a process of
depolitization they are set free to exploit their unique capabilities and competences.
‘Scientization’ is a reform process that goes beyond autonomization (Drori and Meyer,
forthcoming). It signifies a shift in authoritative status. Scientized bureaucratic agencies do not only
base their legitimacy on delegated, rational-legal or moral authority. Scientization implies that
public agencies are being endowed with scientific authority. Through scientization, central banking
is to an increasing extent being framed in apolitical terms. Thus, scientization of central bankers
implies that central banking is in many ways transcending formal politics. Below, a number of
indicators are listed that support the claim that central banking has not only been depolitized,
through a process of autonomization; it has been apoliticized through scientization and,
consequently, it may be about to leave the official political game altogether.
The paper sets out to do three things. First, it argues that central bank management has developed
through three stages since 1875, and that it may well be that it is on its way into a fourth stage in the
new millennium. Hence, the paper will shortly spell out the key characteristics of the formal status
and conception of central banking over the last 150 years (Figure 1). In a second step, the paper
directs its attention towards the processes of autonomization that took hold in central banking
during the 1990s. Figure 2 below illustrates that legal central bank autonomy has now been
implemented in the large majority of countries that has central banks. The factors explaining these
reform efforts are discussed in this second section of the paper, and it will be illustrated that there
are considerable differences as to the ways in which central bank autonomy has been implemented
in different countries and that legal central bank autonomy does not necessarily imply that central
banks are de facto autonomous (Christensen and Lægreid, 2005: 6). Finally, the paper lists and
discusses the most recent tendencies in central bank management which may be early indicators of
yet another reform trend in central banking: scientization. Early indicators of this second generation
of modernization are that new actor profiles excel in central banking circles, that a set of new nodal
points characterizes central bank discourse, that a new central bank terminology is being used in
central bank communication, that new means of communication are being applied by central
bankers, and that an increasing amount of financial resources is being allocated by individual
central banks to research undertaken by central bankers. The paper concludes by discussing the
possible consequences of central bank scientization on political coordination, control and
accountability.
3
Martin Marcussen, March 2005
Nature of
Monetary
Policy-making
Mecanics/Science
PostWashington
Consensus,
2000s:
Liberalism:
Classical Gold
Standard, 18751913
Liberal
rationalism
Formal status
of central
banking
Integrated
Autonomous
Apolitization
Politization
Depolitization
Bretton Woods,
1944-1971:
The Washington
Consesus,
1990s:
Embedded
Liberalism
Neo-Liberalism
Politics
Figure 1: The Formal Status and Conception of Central Banking, 1875-2005*
*The horizontal axis constitutes a continuum of different formal statuses of public agencies. On one extreme, the public
agency in question is completely integrated into the central administrative apparatus and as such it may be asked by its
political principals to pursue diverse and sometimes conflicting purposes. On the other extreme the public agency has
received formal autonomy from its political principals in its pursuance of single purposes.
The vertical axis depicts another continuum with regard to society-wide conceptions of the nature of monetary policymaking. On one end of the continuum monetary policy-making is basically conceived of as a technical endeavour that
can be compared to driving a car. Depending on the car it takes more or less specialized skills to drive it. An ordinary
car can be driven by almost everybody with a minimum level of specialized skills. A formel-1 racer, however, can only
be optimally driven by a very little number of particularly talented people. On the other end of the continuum monetary
politics is considered to be one available political instrument among others. The direction and content of the actual
monetary policy depends on the political priorities of the government in power. Some governments may prefer to
actively intervene into monetary policy decision-making, others not. Some governments may prefer to apply monetary
policy-making with a view to maximize welfare and employment, others have other priorities. Some may exploit
monetary policy in order to achieve objectives in the short run; others consider long-run objectives.
4
Martin Marcussen, March 2005
200
180
160
140
120
100
80
60
40
20
2000
1990
1980
1970
1960
1950
1940
1930
1920
1910
1900
1890
1880
1870
0
Years
Total number of sovereign states
Cumulative number of central banks
Cumulative number of independent central banks
Source: Sovereign states: Freedom House (2000), McNeely (1995: 42). Central banks: The Morgan Stanley Central
Bank Directory 2004, www.centralbanknet.com. Legal central bank independence: Cukierman et al. (1992), Jácome H.
(2001), Malizewski (2000), Maxfield (1997), McNamara (2002), www.centralbanknet.com; national central bank
legislation.
Figure 2: Central bank autonomy on the rise during the 1990s
5
Martin Marcussen, March 2005
SECTION 1: 150 YEARS OF MANAGEMENT DEVELOPMENT IN CENTRAL BANKING
There is no agreement about when central banking as a distinct area of governance activity was
founded. The oldest central banks (Sweden and Great Britain) date back to the 17th century, but the
functions that we today typically associate with central banking were only undertaken by these
institutions much later. It has been argued, however, that the Classical Gold Standard (1875-1914)
constituted the golden era of central banking. To a varied extent, central banks, where they existed,
functioned as the bank for the government providing finance whenever the government needed so,
typically in relation to war adventures, and issued notes. In addition, central bankers later started to
function as a bank for the private bankers. They also undertook to protect the value of the currency
in relation to gold or other precious metals, and they functioned as the lender of last resort with a
view to stabilize the private financial markets and prevent bank panics.
This period was a peak time for central banking, first of all because they were defined as central
bankers in their own right but also because they lived a life in relative isolation. Politicians in
general pursued a laissez faire policy, leaving the job of finding an economic equilibrium to market
forces. Societal groups, particularly trade unions and left-wing party-groups were weak or nonexistent. External equilibrium, i.e. the stable value of the currency measured in gold, was typically
prioritized higher than internal equilibrium, i.e. growth and employment. Although central bankers
were not often formally autonomous agencies (see Figure 1), they typically lived a life of their own
since (Conservative) politicians had no interest or will to intervene in monetary matters. The central
bankers primarily derived their legitimacy from delegated authority. Political programs and plans
did often not contain the issue of monetary policy-making at all. Monetary policy was not on the
political agenda – it could safely be left to the discretion of trusted, competent bureaucrats. The
metier of central banking was considered to be mainly a technical, mechanical endeavour although
not ‘science’ strictu sensu. Within central bank circles, there was an expressed preference for
‘practical economics’ rather than ‘theoretical economics.’ Central bankers themselves did not
necessarily know about monetary affairs upon taking office. Many had previous careers in the army,
politics or private businesses.
The financial meltdown of the 1930s and the consequent world-wide recession had tremendous
impacts on the political configuration of national parliaments and on the formation and activities of
civil society interest groups. The political game had undergone complete transformation and so had
6
Martin Marcussen, March 2005
the previous permissive context for central banking. After World War II a large number of central
banks were nationalized and, therefore, directly subsumed under the control of the government in
power. Central banking had become politicized (see figure 1). Welfare creation, growth and
employment became top priority in the post WWII era. In general, internal equilibrium got first
priority, sometimes at the expense of external equilibrium. The embedded liberal consensus that
characterized the Bretton Woods framework illustrates very well the order of priorities in that era.
Central banking in all its aspects now constituted an instrument along a long series of other macroeconomic instruments. It was not only a possibility to apply monetary and financial policy actively
to intervene into the economic machinery, it was considered to be the duty of any responsible
politicians to integrate monetary policy in overall economic planning. It became possible, and
acceptable, to conduct monetary policy along ideological lines. Both ends of the party-political
right-left scale could apply monetary and financial policies as they desired with a view to maximize
the chances that their political project could become reality. Central bankers now primarily derived
their legitimacy on rational-legal authority. Those people who were appointed to the top position of
national central banks were considered as being loyal top civil servants with direct reference to the
political principals.1 More and more typically, central bank governors were educated economists
that had obtained the practical and scientific skills of running the societal machinery. They were
civil servants with a special kind of competence, often within the area of societal planning and
economic coordination.
After the two oil crises of the 1970s, uncontrollable inflation, persistent stagnation, rising
unemployment, threatening budgetary deficits, external debt, and stifling interest rates rocked the
established knowledge about macro-economic cause-effect relationships. During the 1980s and
1990s a number of paradigmatic changes materialized on many levels. Central bankers kept interest
rates at very high levels for longer periods of time. They send an unmistakable signal to political
leaders that time had come to change strategy. Social democratic leaders hesitantly listened to these
signals, but soon a number of Liberal and Conservative governments regained power. The neoliberal voices that had been subdued during the era of Keynesian dominance were suddenly not only
1
The account of the loyal, technocratic central banker has been exemplified with reference to Benjamin Strong in the
interwar years and Paul Volcker, both the Federal Reserve, in the end 1970s and beginning 1980s: “Benjamin Strong’s
stewardship had been hailed as the first significant triumph of technocratic government, in which disinterested
managerial experts took control of policy from the raw and unruly forces of politics. Government would become
professionalized, rational and efficient like business, insulated from the random folly of popular opinion. Paul Volcker,
the austere technician, oblivious to his own personal gain, enjoyed the same deference. He was admired for his wisdom
and competence and, like Ben Strong, for his willingness to defy and dominate elected politicians. ´Benjamin Strong’s
era was described, in Milton Friedman’s monetary history, as the “high tide” of the Federal Reserve System. For a
number of years, the central bank succeeded in stabilizing money. Volcker’s era, for the same reasons, was a second
time of triumph for the FED” (Greider, 1987: 675).
7
Martin Marcussen, March 2005
listened to but vigorously promoted by the entire political class. The momentum was there for
matching a solution in search for a problem. The problem was defined as being inflation, and the
solution was framed in neo-liberal terms: monetary targeting and balanced state budgets.
Internationally, attention was directed towards the two central banks that historically had performed
well in terms of inflation fighting: the Federal Reserve and the German Bundesbank - the most
politically independent central banks in the world. The mere existence of these banks was taken as
an empirical proof that there was a viable organizational alternative to the hitherto dominating
central bank paradigm. The world’s attention was also directed toward the Washington institutions,
in which a macro-economic policy consensus developed. In their realization of the objectives of
international financial stability and development, the IMF and the World Bank conditioned their
loans and gifts on structural reform and changed policy praxis along the lines that had now become
fashionable in the rich first world countries. Thus, a world-wide modernization trend had its impact
on the role, size and objectives of public administration everywhere. In central bank circles this
process of modernization exempted central banking from the full supervision by political authorities
– central banking received formal, institutional autonomy and was thereby depoliticized (see figure
1). Autonomization became a world wide trend. During the 1990s de facto independence was
formalized in new central bank laws in a very large number of countries (Figure 2). In general,
politicians agreed that their central bank should first of all fight destabilizing inflation. In most
cases, politicians accorded the central bankers with a large degree of autonomy with regard to the
realization of that goal (instrument independence).
8
Martin Marcussen, March 2005
Table 1: Key characteristics of 150 years of central banking
Gold Standard
Bretton Woods
Liberalism
Embedded
liberalism
Washington
Consensus
Post-Washington
Consensus
Neo-liberalism
Liberal rationalism
What is central
banking about?
Central banking is
functioning as an
anonymous machine
Central banking is an
important tool in
policy-making applied
and exploited by
elected politicians
Central banking is an
important tool in
policy-making
reserved for
independent money
managers
Central banking is a
science
What is a typical
central bankers’
profile?
Central bankers are a
diverse crowd of
people
Central bankers are
typically liberal
economists
Central bankers are
typically liberal
economists
Central bankers
consider themselves,
and are considered as,
scientists
What are the major
Financial stability
nodal points in central (gold standard, stable
bank rhetoric
currencies)
Growth, welfare,
employment
Inflation
Scientific
breakthroughs
With whom and how
does a central banker
communicate?
With peers
With political
principals
With market actors
With scientific peer
groups
Central bankers’
relation to politicians
No desire among
politicians to
influence or to know
about central banking
in a pragmatic, nontechnical manner
De facto
independence
like an ideal typical,
loyal civil servant
Politicians think that
they ought to take part
in central banking and
to exploit it fully for
political purposes.
Dependence
by signalling stability
and credibility
via a common
language:
econometrics
Politicians think that
they should refrain
from intervene in
central banking,
thereby signalling
credibility
No external parties
intend to intervene or
even consider
thinking about,
problematizing central
banking
De jure and de facto
independence
De jure and de facto
independence
Central bankers’
relation to science
CBers are practical
CBers apply science
people. They use their
intuition.
CBers apply science
CBers produce
science
How do central
bankers achieve
legitimacy? 2
Primarily “delegated
authority”
Primarily “Rationallegal authority”
Primarily “Moral
authority”
(we have been
entrusted power from
some legitimate and
powerful people)
(we know the rules
and procedures and
deal systematically
according to these
rules)
(we guarantee that
short-sighted
politicians are kept
away from our
business)
Primarily “scientifc
authority”? (We know
more about the
technical details than
anyone else)
2
Clearly, authority rarely comes only from delegation, moral claims, science or rational-legal principles. These
different bases go together. The argument here is rather that, in different periods of time, some bases are more prevalent
in generating authority than others (Barnett and Finnemore, 2004: 21-24).
9
Martin Marcussen, March 2005
Apart from the fact, that central bankers did not succeed in assuring international financial stability
during the 1980s and 1990s, they were increasingly considered as being reliable fire-fighters that
served as counterweights for short-termist, irresponsible politicians. With global financial and
capital markets almost completely liberalized, politicians increasingly perceived it to be in their
own interest to let central bankers do what they wanted to do. Central bankers world wide
constituted a large, homogenous community of like-minded, male, Anglo-American schooled
economists, with previous experience from one of the Washington institutions (Marcussen,
forthcoming). They organized themselves in a number of different international forums, and
exploited every opportunity to come together. Central bankers indeed became a self-sustained group
of actors that increasingly paid loyalty to the universal values of the group. A step towards
scientization – maybe a second generation of modernization? – may have already been taken.
SECTION 2: SCIENTIZATION
Can the world-wide group of central bankers be studied as a clan, - a kind of kin network (Ouchi,
1980)? In a hierarchical conception of state governance, the central bank is an integrated element of
the overall state-apparatus. Such a perspective may very well capture the situation in the post world
war period until the end of the 1970s. The marketization of state governance that many refer to as a
process of modernization implies that central bankers can be seen as autonomous actors on the
national as well as on the global financial markets. Here the reference point is the 1980s and 1990s.
The new development that I refer to concerns a tendency for central bankers to simply transcend
politics by forming an increasingly exclusive network of scientific experts within the monetary and
financial field. A kin network that is tied together by an organic solidarity. Such solidarity may
characterize a profession where there exists a strong sense of community, partly based on a feeling
of personal comfort, partly based on a shared set of normative values, on a belief in a precise set of
causal relations, on a shared notion of validity, and on a strong belief in a common political project.
Such a clan may be conceptualized as an epistemic community which is a network of professionals
with recognized expertise and competence in a particular domain (Haas, 1992).
My argument here is that there exists a number of developments that indicate that the business of
central baking is going through a process of scientization, and that this scientization may lead to the
formation of a world wide clan of central bankers.
The kind of scientization that is dealt with here should not be confused with the post WWII trend of
using science with a view to rationalizing and optimizing public administration and introducing
10
Martin Marcussen, March 2005
planning (Lebaron, 2000: 157-181). After the war, economists entered the central administrative
apparatus in many countries, thereby supplementing the majority of civil servants educated in law.
These economists treated society as a machine that could be tamed, and tuned, and they used
scientific laws in their planning and adjusting. At university this new generation of civil servants
trained in economics had most likely been confronted with mathematics. Mathematical
sophistication helped to sort the insiders from the outsiders: “The valorization of the quantitative
competence was a part of a meritocratic strategy. It offered an opportunity to promote a young
“math whiz” better endowed with scholarly competence than social competence … by minimizing
the importance of linguistic and cultural competence, mathematical economics represents an
attractive route for the integration of foreign students in the United States … Mathematics offered
not only a common language but also weapons and a space of competition” (Dezaylay and Garth,
2002: 75). The difference between the kind of scientization that I talk about and the tendency for
public civil servants in the post WWII period to apply science in their day-to-day business is exactly
that whereas public administration in the 1950s started to apply macro-economic theory, the kind of
civil servants that I talk about – central bankers – have nowadays started to develop theory
themselves. Indeed, part of the scientization thesis that I try to substantiate implies that central
bankers consider themselves, and are increasingly being considered as being scientists in their own
right.
For the same reason, scientization should not be confused with Taylor’s scientific management.
Scientific management does not mean that managers develop theories and concept themselves. It
simply implies that they start to systematically apply theories and theoretical concepts in the
planning of production. Scientific managers are not ‘scientists’, but there are indeed indicators that
now-a-days central bankers are.
Economic professors as central bank governors
One indicator of scientization in central banking concerns the tendency for newly elected central
bank governors to have been highly estimated university professors in economics. Mervyn A. King
at the Bank of England, Axel A. Weber at the Bundesbank, Guy Quaden heading the Banque
Nationale de Belgique, Bodil Nyboe Andersen who is central bank governor at Danmarks
Nationalbank, Leszek Balcerowicz at the National Bank of Poland, and many more have all had
distinguished careers as economics professors. At the time of writing it is still unknown who will
replace Alan Greenspan. None of his predecessors were professors of economics, but three of the
most likely contenders to follow Greenspan when he leaves his job on 1 January 2006 are university
11
Martin Marcussen, March 2005
professors. This is the case for Martin S. Feldstein (Harvard Economist), R. Glenn Hubbard (Dean,
Columbia Business School) and Lawrence H. Summer (Harvard President and the youngest tenured
professor in Economics at Harvard). Only Robert E. Rubin (Chairman of Citygroup Inc. executive
committee and treasury secretary under Clinton) is not professionally associated with scientific
activities (The Washington Post, 21 September 2004: After Alan Greenspan, Who? By Neil
Henderson).
In fact, that central bank governors have a degree in economics is a relatively recent phenomena. If
we look among the three leading central banks, the Federal Reserve did not get a governor that was
formally educated in economics until 1970: Arthur Burns. In Germany, there is a long tradition of
educating economists for the public administration, but still, the Bundesbank had to wait until 1977
before one of the bank’s governors, Otmar Emminger, had a formal degree in economics. In Great
Britain it took even longer! Not until 1993, when Sir Edward George took over as Governor, was
the economist profession represented at the very top of the bank.
12
Martin Marcussen, March 2005
Table 2: Governors of the American, German and British central banks – and their education
Federal Reserve
William McChesney Martin Jr. (1951-1970)
BA in English
Arthur Burns (1970-1978)
economist – the first in the job!
G. William Miller (1978 – 1979)
Marine engineer and law degree
Paul Volcker (1979-1987)
degree in political economy and government
Alan Greenspan (1987-)
economist
Bundesbank
Karl Blessing (1957-1970)
bankier
Karl Klasen (1970-1977)
legal education
Otmar Emminger (1977-1979)
economist – the first in the job!
Karl Otto Pöhl (1980 – 1991)
economist
Helmut Schlesinger (1991 – 1993)
economist
Hans Tietmeyer (1993 – 1999)
economist
Ernst Welteke (1999-2004)
economist
Axel Weber (2004-)
economist
Bank of England
Sir Leslie O'Brien (1966-1973)
educated in Bank of England from clerk upwards
Gordon Richardson (1973-1983)
legal education – practiced as a lawyer
Robin Leigh-Pemberton (1983-1993)
barrister, landowner and banker
Sir Edward George (1993-2003)
economist – the first in the job!
Mervyn King (2003-)
economist
Economists have now completely taken over central banking, also in the highest managerial ranks.
The fact that central bank governors to an increasing extent not only are well-trained economists,
but also are highly estimated university professors, is one indicator that science in all its aspects –
science production, science planning, science distribution, science management – has become part
and parcel of the business of central banking.
Cutting-edge research in central banks
Another indicator of scientization is that central banks increasingly see themselves as producers of
high-level economic research. The European Central Bank, for instance, has, by one of the members
13
Martin Marcussen, March 2005
of the Danish central bank’s board of governors (Jens Thomsen), been described as “a power house
of research” to which employees of other European central banks are seconded with a view to
becoming up-dated on the latest theoretical developments. In 2003, 90 so-called national experts
were seconded to the ECB with exactly that purpose in mind, about half of these from central banks
in Central and Eastern Europe. The ECB also attracts a number of economics researchers that can
use the facilities of the ECB to enrich their own research. Thus, in 2003, 24 professional researchers
stayed for longer or shorter periods of time in the ECB research environment. In another capacity,
the ECB attracts a high number of students of economics who spend time at the bank as trainees and
graduated students whom the ECB selects for specific research projects because they have been
considered as ‘highly talented’ (ECB Annual report for 2003, 2004: 178).
Presently, the Directorate General Research at the ECB counts 58 persons, of which some 43 are
full-time-equivalent professionals (FTE). In comparison, the Department of Economics at London
School of Economics and Political Science counts 61 academic staff members in Spring 2005, of
which 9 are on leave. Not all of the remaining staff members are full-time equivalents. This means
that the very number of full-time researchers at the ECB actually equals a quite large economics
department at one of the major European universities, except from the fact that university people
very rarely are full-time researchers in practice!
The Directorate General Research was created in mid-1998, and at that time it counted about 15
persons (previously employed with the European Monetary Institute). It grew quickly in the next 4
years, and the number of FTE researchers has remained more or less constant in terms of overall
staff since 2003. It goes without saying that all the recruited personal at the Directorate General
Research already possess, or are about the get, a Ph.D.-degree in economics (correspondence with
Ignazio Angeloni, Deputy Director General for General Research, 23.11.2004). That research was
going to be a central pillar of the ECB was evident from the very beginning. Being a new actor on
the international capital markets, the ECB had no track record of successes that could help them
build up a good reputation. One way of boosting its authority and of getting a good reputation in the
population at large, on the capital markets, and in political circles was to become a key player in the
world of economics research. Research-based communication was meant to help establishing and
strengthen the credibility of the ECB in Europe and elsewhere. Thus, from the very beginning, the
ECB aspired to attract the most talented economists around and encouraged them to engage
proactively in the general academic debates.
Although the ECB has a specific directorate for research, it should not be neglected that research is
also being conducted in the Directorate General Economics. This department is much larger in size
14
Martin Marcussen, March 2005
(134 FTE professionals) and is responsible mainly for economic briefing within the ECB, but it also
produces research papers. It is estimated that about a third of these people hold a Ph.D.-degree.
The most recent external evaluation of the economic research activities of the European Central
Bank is not in doubt: “Our overall assessment of ECB research is quite positive. In the short time
since its creation, the ECB has managed to build up significant research capabilities, not only in DG
Research but also in other business areas. This shows in the hiring of PhD economists, the
production of a large number of working papers, the publication of research in leading journals, and
the participation of ECB staff in many academic conferences and workshops” (Goodfriend et al.,
2004. 45). The only regret expressed in the evaluation report is that the potential for research is not
exploited to its full. In other words, we haven’t seen it all yet!
Although the European Central Bank is a leading star among national central banks with regard to
research quantity and quality, the research taking place in the national central banks cannot be
neglected. It is not only the new-coming ECB that is using science to inflate its authority, enhance
its credibility and external reputation, national central banks in Europe all engage seriously in
independent scientific production (Eijfinger et al., 2002). Particular small central banks such as the
Finnish and the Dutch central bank have achieved an excellent scientific reputation during the
1990s. The larger central banks, however, have seemingly not been able to fully exploit their
scientific potentials. For the national central banks the conclusions seem to be the same as for the
ECB: there is a lot more to be expected from central banks in terms of research quality and quantity
in the future.
New means of research dissemination in central banking
Another sign of scientization concerns the ways in which central bankers communicate their
research. On almost all central bank web-sites it is possible to find a list of scientific working papers
written by central bank staff, either alone or together with collaborators inside or outside the bank.
These papers are sometimes published in journals, books, reports etc., thereby reaching a larger,
interested public. Central bank personnel are, on a general note, also actively participating in and
sometimes also organizing scientific seminars, workshops and conferences where research is
presented to peers. In terms of dissemination it is fair to argue that central bankers in general have
become active players in the academic debate in many research areas.
15
Martin Marcussen, March 2005
The latest interesting initiative is the launch in 2004 of a scientific journal edited and run by central
bankers: The International Journal of Central Banking (IJCB).3 Concretely, the journal is a joint
project of the Bank for International Settlements (BIS), the European Central Bank, and each of the
Group of Ten central banks (Bank of Canada, Bank of England, Bank of France, Bank of Italy,
Bank of Japan, Deutsche Bundesbank, Federal Reserve Board, National Bank of Belgium,
Netherlands Bank, Sveriges Riksbank, and Swiss National Bank).
The objective is ambitious: to widely disseminate “the best policy-relevant and applied research on
central banking and to promote communication among researchers both inside and outside of
central banks” (press release, 26 July 2004, www.bis.org). Nothing less than the best!
Overall, there are tendencies that point in a certain direction: that science increasingly is playing a
role for central bankers. The top managers of central banks increasingly have a proven research
record, the employees of central banks increasingly have PhD.-degrees and a key role of central
banks is to independently produce research. There is also a tendency that central bankers as a group
are considered as having recognized expertise in their particular fields of research. It is not only
within central bank circles that research gives authority, the world outside central banks also tends
to consider central banks as if they have recognized expertise in their specific research areas. One
indication, that central bank research is actually highly estimated today is that a central banker,
Edward Prescott, in October 2004, for the first time ever, was granted the Nobel prize in economics.
In the seventies Finn Kydland and Prescott developed public interest theory substantiating the claim
that political credibility could be achieved, uncertainty reduced, efficiency and effectiveness
maximized, and legitimacy enhanced by permanently and consistently trusting important regulatory
functions to autonomous public agencies and then exempting them from political supervision
(Christensen and Lægreid, 2005). This had been praxis in a number of countries for years
(Christensen and Yesilkagit, 2005), but at the time, it can hardly be said to constitute a broader
reform trend. Presently, with a majority of central banks endowed with statutory independence,
Kydland and Prescott’s ideas have become part of mainstream, consensual knowledge. The fact that
prevalent members of the central bank community have been formally recognized by scientific
3
Federal Reserve Board Governor Ben S. Bernanke serves as the initial managing editor of the International Journal of
Central Banks, and will work with designees from the sponsoring institutions to develop the journal. Vítor Gaspar,
Director General, DG Research, serves as the European Central Bank’s representative to the journal’s governing
committee. European Central Bank economist Dr. Frank Smets and Bank of Japan Policy Board Member Dr. Kazuo
Ueda serve as IJCB co-editors.
16
Martin Marcussen, March 2005
peers may boost self-confidence in the central bank community and further accelerate the move
towards scientization.
SECTION 3: THE EFFECTS OF SCIENTIZATION: THE CREATION OF A
TRANSNATIONAL SYSTEM OF KNOWLEDGE GOVERNANCE?
Modernization reforms challenge our existing understandings of accountability, legitimacy and
power relations between civil servants and politicians (Christensen and Lægreid, 2005: 18). This
may also be the case for the scientization processes that I have identified in this article. In this
section, I will argue that the process of scientization may have consequences for how we
conceptualize governance, for how knowledge is being produced and for what kind of knowledge is
being produced, and it my have consequences for political accountability.
The impact of scientization on governance
From territorial governor communities to non-territorial knowledge communities. Scientization
may imply that governance – the regulation of social behaviour – is being transnationalized. Central
bankers have always been involved in international cooperation. During the Classical Gold
Standard, international cooperation between central bankers was characterized by ad hoc and
informal contacts. It was also characterized by a certain kind of asymmetry since some key central
banks, i.e. The Bank of England, constituted the structural centre of the international cob-web of
contacts. Most information and contact ran to, from and via the bank with the world reserve
currency. Since the end of the Second World War, international cooperation has become formalized
in a large number of international organizations and globalized, since more and more countries are
now involved in increasingly complex ways.
Until the present, the many fora in which central bankers meet have been defined by their national
members and the territory they represent. It has been possible to speak about communities of
national central bank governors. International central bank fora have had a distinct territorial
dimension – larger or smaller, depending on the number and type of members. Thus, international
organizations such as these are fundamentally based on a territorial principle of organization and
governance (Egeberg, 2004).
The territorial dimension has been ever present, but this may be changing now! If it is true that
scientization takes hold of central banking and that central bankers merge with a transnational
knowledge community, territorial borders cede to play a role and non-territorial principles of
17
Martin Marcussen, March 2005
organization and governance start to become more descriptive of the field. Conflict structures and
patterns of governance within a knowledge community do not respect territorial borders. Cleavage
structures are rather defined according to the rules of the scientific game: intra-paradigmatic
quarrels about theory, methods, data etc. Knowledge communities are being constructed, partly
replacing, partly supplementing/overlapping governor communities.
Governor communities embrace central bank governors who represent clearly demarcated
territories. Knowledge communities embrace all scientists within a field – central bank personnel or
not. The knowledge community may be broader or narrower in scope than governor communities.
Knowledge communities do not respect national borders. Knowledge communities are more
dynamic and porous than governor communities. Membership of a knowledge community cannot
be inherited the same way as membership of a governor community. For instance, the German
governor will always be part of G10, but the German governor will only be member of the
knowledge community if he can contribute to the generation of scientific knowledge.
From political governance to knowledge governance. Political governance can, for the sake of the
argument, be simplistically defined as regulation with a view to a solving a concrete problem.
Central banking has so far had this practical dimension attached to it. Most tellingly, two historic
persons in the history of central banking who have been keys in defining a veritable central bank
culture, the British Montagu Norman and the American Benjamin Strong, have been described in
the following way:
“Norman and Strong had in common many things that predisposed them to congenial
and effective cooperation. Both were bankers with long and responsible experiences in
the greatest financial centers of their respective countries. Both shared a banker’s
conservatism, distrust of “politicians” and impatience with “theory” that seemed
inapplicable to “practice”” (Chandler, 1958: 260).
The practical aspects of problem solving, rather than theorizing for the sake of theory, have
traditionally been central for the business of central banking. Theoreticians have not been in high
esteem in central bank circles, and it has been argued that the art of central banking was driven by
intuition and life experience. Keynes, for instance, was viewed among central bankers as being a
distant theoretician, and Strong and Norman feared that people of his like would overshadow the
“practical bankers” (Jacobsson, 1979: 45). This may not be the case any more! Compared to
political governance, knowledge governance can be defined as being the production and diffusion
of knowledge. Central for knowledge governance is, that it is seen as an objective in itself to
produce knowledge just for the sake of it. More knowledge is better than less knowledge! Central
18
Martin Marcussen, March 2005
bankers seem to have achieved a level of intellectual development where the general impression is
that they know how the economic organism is functioning, and that it therefore needs to theorize all
that accumulated practical knowledge. In central bank circles, as well as among other economic and
political elites, a large consensus about how to understand macro-economic cause-effect
relationships in general seems to have developed. Central bankers are now exploiting that consensus
as a stepping stone for formalizing and modelling that consensual knowledge. This is what
knowledge governance is all about.
The impact of scientization on knowledge production
From scientific pluralism to strategic overlay of particular research disciplines and approaches.
Related to the development of knowledge governance is the question about what knowledge is and
which aspects of knowledge should be expanded through intensified and targeted research. Since
central bankers in many cases provide for their own income and to a large degree have free hands
when it comes to spending that money, and since central bankers tend to spend considerable
amounts of money in few areas of research activity, it is natural to expect a noticeable expansion of
research activity in some areas of research rather than others. Through the massive injection of
central bank money into research activities in delimited field of research many more actors are and
will suddenly be playing on the field of generating knowledge within a particular subset of macroeconomic research. In other words, the scientization of central banking may cause a disturbing bias
in research focus, since very few other funders of research, private or public, will be able to match
the cashflow emanating from central bank circles. It is difficult to predict whether this potential
research bias will have enduring consequences for the development of economic science in
particular and the social sciences in general, but it is to be expected that the scientific disciplines of
most relevance to central bankers will tend to fill relatively more in the overall field of macroeconomic research.
In the same vein, just as specific scientific disciplines can become overemphasized by an
extraordinary transfusion of funding so can specific scientific approaches. The new impetus to
macro-economic research may have an impact on the scientific discourse in general and
consequently also on which approaches are considered to be marginal/peripheral and which are
considered to be central/important. Since the new actors in the knowledge game are relatively wellfinanced and since it may reasonably be feared that they have a quite narrow agenda, they will be
able to dominate the kind of discussions that will be conducted in certain disciplines. Within the
field of research on monetary policy, we may witness that some voices in the ongoing academic
19
Martin Marcussen, March 2005
debate will be strengthened and others will get relatively less attention. If central bank stabilityoriented ideas about sound money, finances and institutions tend to have achieved a status of
hegemony, this status can only be expected to be further consolidated by additional funding in its
favour.
Within central bank circles, this power to actually influence the entire research climate and the
conditions of scientific work is fully recognized and even counted on. The most recent evaluation
report of ECB research, for instance, argue that the benefits of a central bank from engaging
actively in academic research is, among other things, that the central bank “can stimulate and
encourage external research on issues of interest to the central bank through publications,
conferences, and consulting relationships” (Goodfriend et al, 2004: 5). The “powerhouse of
research”, the European Central Bank itself, has ostensibly already grasped the overall idea behind
the concept of research management since it “ uses its research capacity to encourage, coordinate,
and lead research efforts of the national central banks of the Eurosystem” (Goodfriend et all, 2004:
22). And this is not in vein! It is being concluded that “[g]iven its place at the centre of a continental
system of central banks, it is not surprising that the ECB has already had a major effect on academic
discourse throughout Europe” (Goodfriend, 2004: 24).
The impact of scientization on power-relationships and political accountability
From depolitization to apolitization of the civil servant-politician relationship. Apolitization
through scientization simply means that the entire language of public administration is changing.
The turn towards the use of a scientific language radically alters the relationship between the
scienticized civil servant and the elected politician. The major characteristic of a scientific
statement, unlike political and administrative statements, “is that they are privileged in the sense
that, if derived in accordance with scientific procedures, they are considered to give greater
assurance of truth. It is more useful if conclusions on, say, what works and what does not work in
government are scientific because scientific propositions are understood to be more reliable”
(Farmer, 1995: 71). In other words, scientized civil servants becomes out of reach for political
argumentation because only the language of science is a valid means of communication.
From external to internal accountability. From the previous considerations it follows that the locus
of accountability in central banking may be about to change. Whereas before central bankers were
accountable to the financial markets (during the 1990s) and politicians (during Bretton Woods),
central bankers are now accountable only to their scientific colleagues within the knowledge
20
Martin Marcussen, March 2005
community. In knowledge communities, central bankers can only enhance their legitimacy and
authority by living up to a number of scientific standards and continuous peer review processes.
Whereas before central bankers were obliged to communicate broadly with politicians, citizens and
the financial markets, they now only need to communicate with their peers. In doing so, they apply
an arcane scientific terminology that exclude a large number of people – even within the ranks of
economists. So when it has become fashionable in central bank circles to engage in a debate about
“How do Central Banks Talk’? (Blinder et al., 2001, Amato et al. 2002) or whether it is a good or a
bad thing that central bankers talk (The Economist, July 24, 2004, Economic Focus, p. 65: “It’s not
always good to talk”), this debate should not be interpreted as a general attempt to open the business
of central banking to the broader public or to elected politicians. The issues that are currently being
discussed internally in central bank circles is how one type of scientific economist employed in the
central bank, should send signals to another kind of scientific economist on the financial markets.
Transparency is indeed a buzzword in central bank circles these days (The Economist, August 9,
2003, p. 56: “As clear as mud”), but the term should not be confused with the similar term applied
to the rest of the public administration. In central bank circles “transparency” simply means that
certain kinds of information is been released at financial press conferences after central bank board
meetings. Under the headline “Boring Bankers – Should we listen?”, Bank of England Monetary
Policy Committee member, Richard Lambert, concludes that central bankers talk because they can
and want to dialogue with the financial markets (April 22, 2004). They do not talk because they
want to inform the broader public about the status, functions and decisions of the central bank, they
do not talk to gain the trust of “the people”, but to communicate with peers on the financial markets.
Clear talk!
Just as we can only detect scattered indicators of scientization in central banking, the consequences
of scientization discussed above may, of course, be nothing but plausibility probes that allows us to
formulate testable hypotheses (Eckstein, 1975: 108). In the next session I will conclude by
discussing other ways in which we could understand the process of bureaucratic scientization and
whether the case of central banking can be generalized to other parts of the public bureaucracy.
SECTION 4: MAIN ARGUMENT AND UNRESOLVED QUESTIONS
The main argument of the present article has been that public administration may be going through
a second generation of modernization. The first generation of modernization implies a wide-ranging
21
Martin Marcussen, March 2005
autonomization of public agencies. In the area of central banking, autonomization has as a
consequence that politicians, while believing that monetary policy is an important element in
macro-economic policy-making, are of the firm belief that they should not intervene in that
particular area. Through autonomization, monetary policy has been depoliticized and a consensus
has developed that it would be illegitimate for politicians and others to intervene into the domain of
central banking. Both indirect (i.e. simply talking about the conduct of monetary affairs in public)
and direct intervention (i.e. criticizing the monetary policies conducted by central bankers) in
monetary policy is considered to be highly inappropriate, sending the wrong signals to market
actors. Today, national politicians are very much aware of the special position of monetary policy
and the central bank. If they do something wrong in that area, they would immediately be
considered by the actors on the financial markets to be irresponsible and short-termish. The price of
loosing one’s credibility can be so high that the awareness of monetary policy-making is indeed
very much present.
The second generation of modernization implies that public agencies are undergoing a process of
scientization. To an increasing intend civil servants consider themselves as knowledge producers
rather than knowledge consumers. To an increasing extent civil servants participate in the scientific
game in the transational scientific community. In the area of central banking, this means that
monetary policy is becoming apolitized. Apolitization means that monetary policy, by politicians
and others, is being considered as a scientific discipline only which transcends politics. The entire
area of monetary policy-making doesn’t play a role in the day-to-day business of playing the
political game and it does not have a place in the hearts and minds of ordinary politicians. Whereas
before, national politicians, while keeping it for themselves, almost always had an opinion about
interest rates and the level of inflation, the new tendency today may be that national politicians do
not even consider these aspects of macro-economic policy what so ever. These aspects do not form
part of their preoccupation and vocabulary. They have no awareness in that area of real life
phenomena. A whole trunk of potentially explosive issues has been withdrawn form the political
agenda.
It is possible, though, that it is too strong to interpret the movement from autonomization to
scientization as being a question of profound/deep transformation (Egeberg, 2004). A first unsettled
question, therefore, is whether scientization is a new stage in modernization or an additional form of
autonomization? Arguments can be made both ways and in between. A critique may be that
scientization is one strategy among others that can be applied in an attempt to autonomize public
administration (Flinders and Buller, 2005). Alternatively, it can be argued that scientization is the,
so far, highest order of autonomy that can be reached by public agencies. This implies that the
22
Martin Marcussen, March 2005
strategies applied to foster autonomization in the public administration continue to diversify and
extensify. It may be that the strategy labeled “rule-making” (the public agency does exactly and
only what the rules tell it to do) is a first prudent step towards autonomization and therefore
exemplifying 1st order autonomy. “Preference shaping” (the public agency does what it has to do,
given the external circumstances. There is no alternative), may according to a similar logic be
considered a strategy that is somewhat more far reaching, and, therefore, exemplifies 2nd order
autonomy. 3rd order autonomy then concerns the granting of “institutional autonomy” to public
agencies (the public agency is exempted from full political supervision) and 4th order autonomy in
the form of “scientization” is the, so far, most drastical step towards autonomization (knowledge
creation: the public agency writes the rules of the game).
A second question concerns empirical generalization. Given that the scattered data reported in this
article is valid, do the identified tendencies represent a broader phenomenon in public
administration? The answer at this stage of research would be a: Not yet! There are no clear
tendencies that whole trunks of public administrations are defining themselves beyond politics. It is
too early to label the public administration as 'the untouchables'. It is still common practice, in the
media and broader public alike, to fundamentally question the raison d'être of multiple aspects of
the public administration writ large. In that regard, central banking is an exeption since public
questioning of central bank practices is almost absent. But it might be a question of time before we
see such tendencies unfold. The public administration is funding knowledge like private research
foundations, it is communicating and commercializing knowledge like private think tanks and
consultancies. So the step towards also creating knowledge like universities may not be so large.
In contrast, the creation of knowledge by epistemic communities at the international level is not a
new phenomenon (Haas, 1992). The concept of epistemic communities has been used widely in
various issue areas. Also, it is not a new phenomenon that international bureaucracies, or parts of
them, are becoming scientized (Haas, 1990). At present, however, there are no obvious signs that
scientization is a general phenomenon in national public administration.
23
Martin Marcussen, March 2005
REFERENCES
Amato, Jeffrey D., Stephen Morris and Hyon Song Shin (2002), ‘Communication and Monetary
Policy’, www.nuff.ox.ac.uk/users/Shin/policy.htm
Barnett, Michael and Martha Finnemore (2004), Rules for the World – International Organizations
in Global Politics, Ithaca: Cornell University Press.
Blinder, Alan, Charles Goodhart, Philipp Hildebrandt, David Lipton and Charles Wyplosz (2001),
“How Do Central Banks Talk?”, Geneva Reports on the World Economy, no. 3, Geneva:
International Center for Monetary and Banking Studies.
Chandler, Lester V. (1958), Benjamin Strong, Central Banker, Washington, D.C. : Brookings
Institution.
Christensen, Jørgen Grønnegaard and Kutsal Yesilkagit (2005), ‘Delegation and Specialization in
Regulatory Administration: A Comparative Analysis of Denmark, Sweden and The Netherlands’,
paper prepared for the SCANCOIR/SOG Workshop on “Autonomization of the State: From
Integrated Administrative Models to Single Purpose Organizations”, Stanford University, April 1-2.
Christensen, Tom and Per Lægreid (2005), ‘Agencification and Regulatory Reforms’, paper
prepared for the SCANCOIR/SOG Workshop on “Autonomization of the State: From Integrated
Administrative Models to Single Purpose Organizations”, Stanford University, April 1-2.
Dezaylay, Yves and Bryant G. Garth (2002: 86-) have an interesting thesis that the source of
scientification can actually be located in the Washington institutions. The IMF was directed by the
research department and the World Bank got its legitimacy through its scientific authority.
Drori, Gili S. and John W. Meyer (forthcoming), ‘Scientization: Making a World Safe for
Organizing’ in Marie-Laure Djelic and Kerstin Sahlin-Andersson (eds.) Transnational Regulation
in the Making, Cambridge: Cambridge University Press.
Eckstein, Harry (1975), ‘Case Study an dTheory in political Science’, in Fred I. Greenstein and
Nelson W. Polsby, eds., Handbook of Political Science, vol. 7, Stratgeies of Inquiry, AddisonWesley Publishing Company, pp. 79-137.
Egeberg, Morten (2004), 'EU Institutions and the transformation of European Level Politics – How
to understand profound change (if it occurs)’, ARENA Working Paper Series, 19/2004, Oslo:
ARENA.
24
Martin Marcussen, March 2005
Eijfinger, Sylvester C. W., Jacob de Haan and Kees Koedijk (2002), ‘Small is beautiful: Measuring
the research input and output of European Central bank’, European Journal of Political Economy,
18(2): 365-374.
Farmer, David John (1995), The Language of Public Administration: Bureaucracy, Modernity and
Postmodernity, Tuscaloosa, Ala.: University of Alabama Press.
Flinders, Matthew and Jim Buller (2005), ‘Depolitisation, Democracy and Arena-Shifting’, paper
prepared for the SCANCOIR/SOG Workshop on “Autonomization of the State: From Integrated
Administrative Models to Single Purpose Organizations”, Stanford University, April 1-2.
Goodfriend, Marvin, Reiner König, and Rafael Repullo (2004), ‘External Evaluation of the
Economic Research Activities of the European Central Bank’, Frankfurt: ECB.
Greider, William (1987), Secrets of the Temple – How the Federal Reserve Runs the Country. New
York: Simon & Schuster.
Haas, Ernst (1990), When Knowledge is Power – Three Models of Change in International
Organizations, Berkeley: University of California Press.
Haas, Peter (1992), “Introduction: Epistemic Communities and International Policy Coordination”,
International Organization, 46(1): 1-35.
Jacobsson, Erin E. (1979), A Life of Sound Money – Per Jacobsson. His Biography, Oxford:
Clarendon Press.
Marcussen, Martin (forthcoming), ‘The Transnational Network of Central Bankers’, in Marie-Laure
Djelic and Kerstin Sahlin-Andersson (eds.) Transnational Regulation in the Making, Cambridge:
Cambridge University Press.
Ouchi, Willam G. (1980), ’Markets, Bureaucracies and Clans’, Administrative Science Quarterly,
25(1): 129-141.
25