The Last Gentlemen’s Club

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29/10/ – Is one of the last bastions of gender inequality in the rich democracies
finally starting to crumble? In the past few weeks, Janet Yellen was nominated as
the first female chair of the US Federal Reserve Board, and Karnit Flug became the
first woman to be appointed Governor of Israel’s central bank. If money is power,
then women must no longer be excluded from controlling the supply of it.
Although women do head central banks in 17 emerging markets – including Malaysia,
Russia, Argentina, South Africa, Lesotho, and Botswana – they are the exceptions
that prove a general rule: women are excluded from the world of monetary

Yellen’s appointment is particularly important, because she breaks the glass ceiling
in the advanced economies. Until her promotion, no member of the G-7 had a woman
heading its central bank.

Moreover, men occupy all 23 seats on the European Central Bank’s (ECB) Governing
Council. Since the Bank of England’s Monetary Policy Committee was established in
1997, only three women have been appointed as external members – and no woman has
even been nominated since 2002. The Bank of Japan has only one woman on its Policy

Women, nowadays, are more likely to occupy top political jobs. Angela Merkel was
recently reelected for a third term as German Chancellor; Britain’s voters elected
Margaret Thatcher three times as Prime Minister; and France has had a female prime
minister. But no woman has come close to leading these countries’ central banks.

Equality seems to have eluded central banks even in gender-conscious Scandinavia.
For example, Norway, which has been promoting positive gender discrimination for
years and recently elected Erna Solberg as its first female prime minister, has yet
to allow a woman to control the purse strings – at either the central bank or the
finance ministry, with its powerful sovereign wealth fund.

Recent attempts to compel change have been counter-productive. In an effort to
promote diversity and gender equality in the ECB, the European Parliament in 2012
blocked the appointment of Luxembourg’s Yves Mersch to the bank’s executive board.
But MEPs then failed to propose a plausible female alternative, leaving the ECB
understaffed for weeks during the eurozone sovereign-debt crisis.

Unsurprisingly, the European Parliament’s handling of Mersch’s appointment was
widely ridiculed, and his nomination was eventually confirmed. But many people drew
the wrong conclusion from the episode, which they viewed as affirming the idea that
competence and experience must always trump ill-conceived ideas about positive
discrimination. If there are no suitable female candidates, it was argued, then the
best candidate should prevail, regardless of gender.

But this view misses the point. Why were there no suitable female candidates in the
first place? Women hold around 30% of economics doctorates in developed countries,
including Europe, and not one of them could be brought forward for the ECB post? The
more reasonable conclusion to be drawn from Mersch’s appointment is that no serious
effort was made to identify qualified women early on.

On the contrary, female candidates tend simply to be overlooked. This was the case
for both Yellen and Flug – until the preferred, male applicants dropped out. Flug
was finally offered the top job only in the absence of a male rival, though she was
already occupying the position temporarily while the board searched for Stanley
Fischer’s successor.

Neither Yellen nor Flug was held back by a lack of academic credentials – both are
accomplished scholars – or by the catch-all charge of having “limited experience.”
Flug has been the Bank of Israel’s deputy governor since 2011; Yellen has been
involved in the Fed system for almost two decades, first in San Francisco and
subsequently as Vice Chair of the Fed’s Board of Governors.

If a lack of skills or experience is not preventing women from reaching the summit
of monetary policymaking, what is? The most plausible explanation is that, as
organizations with non-elected leaders and limited transparency, central banks tend
to function as clubs whose largely male membership hire and promote familiar types;
governments usually reinforce this by simply rubber-stamping the banks’ preferred
candidate for the top job.

If gender is a proxy for diversity, then central banks fail a basic test of it.
Promoting diversity – not only in terms of gender, but also with respect to age and,
in many countries, ethnic background – is a matter of effectiveness as much as a
question of social justice. A broader, more transparent recruitment process would
reduce groupthink, challenge the status quo, and, one hopes, leave central banks
better equipped to handle a financial crisis. The promotion of Yellen and Flug is a
good start; now the doors of these fusty male-dominated clubs must be flung wide

Paola Subacchi is Research Director of International Economics at Chatham House.

Copyright: Project Syndicate

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