The Alternative Externalisation Strategy, Operational Independence and the Bank of England

Abstract

This article places analysis of operational independence within a context of broader debates that took place in the Bank of England in the 1970s focused on how it might achieve greater prominence and authority. A clear alternative to operational independence emerged in the form of an ‘externalisation’ strategy designed to loosen constraints on the Bank and enhance its role in the formulation and direction of national economic policy. Contrary to accounts which suggest that operational independence benefited the Bank this article argues that it was devised to reduce its remit. After 2007 the Bank was able to ‘capitalize on crisis’ and develop a broader view of its operations including an externalisation dimension to increase its visibility in public discourse and foster its role as commentator on broader government policy.