Old programs never die

It is a libertarian commonplace that government programs, once created, live forever--whether or not they do a good job at their assigned task, and indeed, even if the need for their assigned task disappears. I see that Belgium is providing a texbook example:

THANKS TO Alain Destexhe, a Belgian senator (and that rarest/loneliest of beings, a Belgian free market liberal), for today's fact of the day. Mr Destexhe reports on his blog that the Belgian central bank still employs more than 2,000 people, even though it has not had a currency to oversee since 1999, when Belgium joined the euro.

Comments

Um, banking supervision, maybe? As I recall, there are 12 Federal Reserve Banks in this country, none of which have their own currency to oversee (the Federal Reserve Board does that), so if we are to make fun of countries for having central banks without their own currencies, we should in fairness start at home.

Posted by jsb | March 5, 2008 7:39 PM

The German Bundesbank finds itself in the same place as the Belgian central bank. Here is the Bundesbank's description of its "assigned tasks":

The Bundesbank - along with the other central banks in the euro area - shares responsibility with the European Central Bank (ECB) for fulfilling the Eurosystem’s monetary policy tasks. Decisions on monetary policy and other issues concerning the Eurosystem are not taken by the ECB itself but by the Governing Council of the ECB, which comprises the governors of the national central banks in the euro area and the members of the Executive Board of the ECB. The Governing Council’s decisions are implemented by the national central banks. Furthermore, the Bundesbank is represented on all of the Eurosystem’s committees and working groups. The Bundesbank’s tasks are laid down in the Bundesbank Act (Bundesbankgesetz) and in the EC Treaty.

The following five areas of business are at the centre of the Bundesbank’s strategic activities.

1) Price stability in the euro area and implementation of monetary policy measures in Germany
2) Supervision and ongoing development of the international monetary and financial system
3) Stability of payment and clearing systems
4) Cash supply
5) Banking supervisory tasks

The "world's tallest female econoblogger" might be able to do all these tasks over a double wet non-fat soy cappuccinoat Starbucks. I suspect that to do them well requires - well - a fair number of people.

Posted by ndm | March 5, 2008 7:43 PM

Do you have any idea what a central bank is, Ms. econoblogger? It sure doesn't sound like it.

The treasury department deals with currency. The central bank does a whole lot more--like setting interest rates and controlling the money supply. Your ignorance is staggering. Every one knows that a European nation that adopts the euro does not therefore give up its right to control its money supply. The EU debated this for like ten years. Staggering. Ignorance.

Think before you post!

Posted by Mortimer Madler | March 5, 2008 9:50 PM

Mr. Madler, go read the ECB's website. All monetary policy is decided by the ECB; the NCBs have to do what the ECB tells them on monetary policy, and they cannot act on their own without ECB permission.

Now, the national banks supervise the payment system and collect statistics, which are worthwhile tasks. But monetary policy is not a function of NCBs in the Eurozone.

Posted by Oildrilling Lunatic | March 5, 2008 11:09 PM

Incidentally, Grant Writing Confidential covers just this subject from a U.S. perspective; consider "Zombie Funding – Six Tana Leaves for Life, Nine for Motion and Déjà vu All Over Again—Vacant Houses and What Not to Do About Them. One other post on Phoenix Programs deals with a similar subject.

Posted by Jake | March 6, 2008 12:42 AM

Oildrilling Lunatic -

I did read the ECBs website. In fact, slide 14 of the presentation you linked to described the National Central Banks' role as follows:

The operational set-up of the Eurosystem takes account of the principle of decentralisation. The national central banks (NCBs) perform almost all operational tasks of the Eurosystem. In doing so, they enact the decisions made centrally by the Governing Council of the ECB. (my emphasis)

The Oildrilling Lunatic has clearly forgotten the difference between setting policy and implementing policy. The number of people it takes to implement a policy typically vastly exceeds the number of people it takes to set a policy.

Frankly, this was a sloppy post by Megan McArdle. She essentially forwarded a junk email without the courtesy of doing even the minimum of checks on its veracity. It took me less than a minute to find an English language webpage describing the "assigned tasks" of the Bundesbank.

This was not a picture of the day from Andrew Sullivan or a basketball blog from Matthew Yglesias this was a blog on what is supposedly the core expertise of the "world's tallest female econoblogger."

Posted by ndm | March 6, 2008 3:54 AM

Alain Destexhe's complaint was that there is still a Belgian National Bank, but that it employs so many people. Sweden's national bank makes do with about 500 employees, and they still have a currency to manage...
Just visiting the man's blog would have been sufficient to verify this.

Posted by Kv | March 6, 2008 7:06 AM

They're there in case the Euro breaks up. I've still got some Belgian Francs. Then again, I've still got some of the banknotes that Hitler printed for use in German India.

Posted by dearieme | March 6, 2008 7:30 AM

It would be interesting to see if the Belgium central bank employs fewer or more people than it did before the ECB. My guess is that it is more.

Posted by Yancey Ward | March 6, 2008 11:32 AM

If I'm not mistaken, the Belgian National Bank does more than just currency oversight. They do a lot of corporate supervision (sort of like the SEC), produce most macro-economical statistics and give advice on economic policy.

Also, free market liberals really aren't very rare in Belgium. The liberal (i.e. European, classical, free market liberal) parties make up about a third of Parliament.

Posted by Laurens | March 6, 2008 4:52 PM

ndm:

Mortimer Madler stated, "Every one knows that a European nation that adopts the euro does not therefore give up its right to control its money supply."

My response pointed out that, in fact, that statement was wrong; all decisions on monetary policy were made by or required the approval of the ECB, and so the Euro zone countries do no, in fact, have the right to control its money supply.

Did I say that the ECB implemented policy? Did I say that the NCBs were redundant? Did I defend Ms. McArdle's post?

Well, if you started with the laughably erroneous notion that because I was contradicting Mr. Madler's errors I by definition had to be engaging in defending Ms. McArdle, you might in your self-induced blindness reach the conclusion that "monetary policy is not a function of NCBs" meant implementation instead of the policy-making that was the context of the rest of the comment.

This would require special blindness to the fact that the comment in question did not address or object in any way to a previous comment that named policy implementation as the function of an NCB. However, it seems that sad and pathetic people more interested in point-scoring on someone else's blog than in reasoned discourse can blind themselves to the obvious quite easily.

Posted by Oildrilling Lunatic | March 6, 2008 9:06 PM