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Beethoven and the Bank of England

Mervyn King has been a pioneering proponent of inflation-targeting as a central bank strategy, first as the Bank of England's chief economist and then as governor. King shared his insights in an interview with Gilbert Kaplan.

Mervyn King's policymaking credentials are well established. A Cambridge-educated economist who taught at Harvard, the Massachusetts Institute of Technology and the London School of Economics, King has been a pioneering proponent of inflation-targeting as a central bank strategy, first as the Bank of England's chief economist and then, since June 2003, as governor. Less well known is his love of music, a passion he developed relatively late in life and one that he shares with another noted policymaker, Federal Reserve Board chairman Alan Greenspan.

King likens the bank's Monetary Policy Committee to a string quartet playing Beethoven, for its combination of individuality and collaboration. But unlike Greenspan, the domineering maestro of the Fed, the Bank of England governor considers himself a modest first violinist -- influencing the direction of debate but still only one member of the policymaking ensemble.

King shared his insights about music and money in an interview with Gilbert Kaplan, the founder of this magazine and a world-renowned interpreter of Gustav Mahler's Second Symphony. Kaplan hosts "Mad About Music," a celebrity classical music and interview program that airs on WNYC radio in New York. The following is from a transcript of a broadcast, edited for Institutional Investor, that was scheduled to air this month.

Kaplan: In England your every move is carefully calibrated by the market for clues as to what will happen to interest rates, the pound and the British stock market. Far less known is your abiding passion for music and the unique story of how you and music found their way to each other. I guess we should start by asking you to tell this amazing story.

King: Well, my story with music got off to a very bad beginning. In Britain it used to be the case that at the age of 11 you would take a competitive aptitude test, I suppose, and that would determine which secondary school you went to. So when I arrived at the first day of my new secondary school, all the new entrants to the school were asked on the first morning to sing up and down a scale, on their own, in turn. We all lined up, I made my attempt, and I failed. I wasn't in the school choir, I wasn't allowed to have lunch in the first sitting, I had to have lunch on the second sitting every day for the rest of my school career, and I was told that I was "not musical." We were divided into two groups -- those who were musical and those who weren't. And for many years I thought that was my fate. Then, years later, I listened to a radio program -- this is only about 12 years ago now -- which said: "Are you tone-deaf? There is no such thing. Listen to this. Here is a recording of a school choir made up of children who are tone-deaf." And it sounded wonderful. So I did something that I always wanted to do, which was to rush out, buy a CD player, buy a CD and listen to it. It seemed to me one of the most passionate things I had ever heard. This was not the complexity or the seriousness of classical music as I might have feared it. It was something that immediately gripped me. And it was Beethoven's Seventh Symphony, and I went out and I bought the recording. It really caught me, and it still does. I cannot listen to this without feeling the energy and the passion that goes into the music.

So let's compare power in high finance to power in music. As governor, you have the power to influence interest rates. But you're not alone. The Bank's Monetary Policy Committee is made up of nine members, but you chair it. How would you describe your role as the chairman of this committee? Are you more like a conductor -- setting the tempo, driving people to your interpretation -- or would you be more of a true team player, as someone playing chamber music together with your colleagues?

It's much more the latter. But I suppose you could think of it as a string orchestra where I always have the option of standing up and leading the orchestra in a direction on the odd occasions when I think they might need that steer. But usually I would help them start, help to set the pace and the issues that we talk about, but it is one person, one vote.

Last November this committee made a huge policy switch, deciding to raise interest rates. It must have been a tense atmosphere. Earlier I asked you if you would look in your experience of music and pick some work that might serve as a soundtrack for that landmark meeting. What did you come up with?

Well, I think if I were to say what piece of music best represented the atmosphere and the style of the Monetary Policy Committee, it would probably have to be a Beethoven string quartet, a late string quartet, because it combines that element of intellectual depth and seriousness. We discuss in a heavily intellectual way what is going on with the economy, together with what was described of Beethoven's quartets, an innovation in harmony, so that the Monetary Policy Committee in Britain is an innovation. It's the first committee of its kind in the world, I think, which has this approach of each individual giving their own view and having their votes recorded and published only two weeks after they cast their votes. So we are an innovation in the way monetary policy is set, and we operate under what's called constrained discretion. That is, we do make our own judgments, but within the constraint of being told to hit a precise inflation target looking ahead. And I like to think of Beethoven's string quartets as an exercise in imagination and discretion, but within the constraints: the pattern laid down by the form of a string quartet and by the fact that each individual player is playing their own instrument, comes to their own judgment but nevertheless recognizes that they are working as a team and that the outside world sees them as a collective, even if their own contribution is that of an individual.

You know, one can compare you to Alan Greenspan, who started out to be a musician before he went what I regard as wrong and became an economist. He's actually a graduate of our Juilliard School. Do you and he ever discuss music?

Yes, sometimes. We discuss music and tennis. I think we both have these interests that take us away from the minutiae of details of the economy.

What about Tony Blair, your prime minister? Is he passionate about music? Do you ever discuss music with him?

I don't know what his interest in music is except that he does play the guitar rather a lot, as opposed to the violin. Certainly, his playing career was in a rock band rather than an orchestra.

When we have discussed music, I have been struck by the complete absence of any British composers. No Elgar, no Vaughan Williams, no Benjamin Britten. How can the governor of the Bank of England neglect his own composers?

Well, I think we have a long tradition at the Bank of England of going for what we think is the best. We don't, for example, make our employees travel on British Airways if that is not the most convenient way to get there. My personal selection doesn't include, as you say, a British composer. I'm sure that others would include one. But it should be a matter of free choice and competition.

I understand you serve on the advisory board of the London Symphony Orchestra. What kind of advice do they want from the governor of the Bank of England?

Well, I don't think it's advice about which music to play.

They're often paid in foreign currency when they travel. Do you give them advice on hedging against the pound?

Certainly not, because I have no idea how any currency is likely to move.

Now, as you plunged into classical music, have you come to know any of the real stars?

No, I haven't. One of the stars I would love to meet is Nigel Kennedy, the violinist. There is something about the violin that I love, as an instrument. It's one that I know I could never play, but if I could play an instrument, that's the one I'd go for. He's a rather unusual person, hasn't always been a conventional musician. He has worn his emotions on his sleeve quite literally in the fact that he wears the scarf of his favorite football team when performing quite often. And of course, his favorite football team, Aston Villa from Birmingham in England, is also my favorite football team.

Now, many English football teams, or soccer, as we call it in America, are known for their songs, normally sung in unison, even in harmony, by thousands of their fans at matches. I understand that the lyrics of some of Aston Villa's most popular songs contain some shockingly foul language, and I suppose not the lyrics that the governor of the Bank of England should be caught dead singing?

That is true, but I still will persevere in my attempts to get the club to play over the loudspeaker system in the ground as the teams run out, a little extract from Beethoven's Seventh Symphony. I think that would really get the players going.

Earlier you described the bank's decision making in musical terms. Have you found any other connection between monetary policy and music?

Well, British monetary policy, rather like my interest in music, came rather late in life. And we had a record in the past 50 years in Britain of a rather unsuccessful degree of monetary policy, and it all changed in the past ten years or so. And it began in 1992, when we left what was called the exchange rate mechanism. We used to have a fixed exchange rate with the deutsche mark. And it all fell apart in September 1992. Now, two days before it all fell apart, I was sent to Frankfurt to meet with the Bundesbank, and we went on what became probably one of the world's most unsuccessful diplomatic missions. We were there to persuade the Germans that the link between sterling and the deutsche mark should be kept. And two days later it was swept away under massive speculation. Now, I mention all this because that was the time when I met, for the first time, Otmar Issing, the German economist who is now the chief economist of the European Central Bank, who was then in the same position at the Bundesbank. And as we approached the building representing Britain on our mission, it was almost a Wagnerian scene. There was thunder and lighting overhead. It really did symbolize something that was going to be very important. But for me the importance was that I met Otmar Issing. Several years later he took me to the Mozart festival at Würzburg, south of Frankfurt, which is his hometown. And that was the first occasion when I heard Mozart's 40th Symphony, one of his late symphonies. I've never forgotten that, my first listening to that.

Listening to you speak so passionately about music makes me wonder if you wish that you could have been a musician instead of an economist.

In some ways, I think I do. I think I would like to have started as a violinist and then become a conductor. I think I would really have enjoyed that. I think the role of conductor combines the ability to be a free spirit -- to use imagination -- as well as to be an intellectual study, which is what I did for most of my life. I've only been at the Bank of England for the past 13 years. The ability to do that, and also to lead a team, just to get a team of people playing for you. That's what I've tried to do at the Bank of England and what I think I would have much enjoyed doing as a conductor. And of course, the great virtue of being a conductor is that you can go on forever.

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