Central Banks as Regulators and Lenders of Last Resort in an International Context: A View from the United Kingdom and Discussion

The implications of national sovereignty constitute a characteristic, and evolving, twentieth century problem. The nation-state, developed over previous centuries, has proved capable of horrific abuse; but at its best it has produced a legal, administrative, economic and financial framework in which its citizens have been able to prosper as never before. A natural counterpart of these developments was the emergence of at least potential conflicts with the world outside; and it has been common for people, in attempting to reconcile these conflicts or solve the problems they pose, to draw on successful domestic national experience and suggest that this should be analogically extended beyond the frontier. There have been various kinds of challenge posed this century to the competence of a single nation-state to solve its problems alone. First, political conflicts with other nation-states, of which the first and most spectacular example was the 1914-18 war. Secondly, economic conflicts with other nation-states -particularly virulent between the wars when many countries suffered the intended or unintended effects of other countries’ tariff regimes, exchange-rate movements and fiscal and monetary policies. Thirdly, and especially in the last two decades, there has been the dramatic development of private institutions large enough to affect the economic sovereignty of even quite major countries -the multinational companies and banks. It has been tempting to many people to meet these different demonstrations of the limitation of the power of the single state by trying to envisage and bring about the development of a sovereignty over and above that of individual nations. Many saw in the League of Nations idea the germ of world government; some, though probably fewer, initially held the same hopes of the United Nations. During the last war, and at the Bretton Woods talks towards its close, there were those who hoped to develop a genuine world central bank. Later, and on a less than fully international scale, the European Economic Community was founded with the