National CFOs

Yesterday, I was reading an article that quoted the head of Iceland's Central Bank as saying that they would soon be joining the Euro because Iceland might know a lot about fisheries but maybe they didn't have specialized knowledge about monetary policy. This was interesting enough (though I tend to think the European Union is an undemocratic bureaucracy that is expanding, destroying every economy in its path, but that is a topic for another day).
 
So it got me to thinking--why do some countries so consistently make bad economic and governing decisions? I look at my current neighboring country, Argentina, and the case is simply puzzling. I travel to Argentina with relative frequency, and have collectively spent several months in the country. The people I encounter there are intelligent, many are well-traveled, and they all recognize Argentina's caricature government and economy. The 10-year boom/bust cycle is accepted as an unalterable fact of life.
 
Economic policies in many countries are dictated from the top of the executive branch, since it is the economic health of a country that usually makes or breaks an executive's popularity. The Finance Minister is one of the most coveted jobs in a government, and it carries tremendous prestige. As a result, it is a tremendous political reward to the chief executive's most loyal constituencies. Or else it is given to somebody who can "tow the line" appropriately. Rarely are the finance ministers, who are in fact the CFO of the country, chosen on the basis of providing quality, independent counsel and direction on finance and economics matters. Instead, the tail always wags the dog. Economic policy is made out of political needs, rather than out of economic realities. This is no less true in the United States than it is in Argentina.
 
In the world of international business, CFOs are often accountable to the Board of Directors, not to the CEO. Perhaps Finance Ministers should be too--either accountable directly to the voters or else to the Legislative authority of the country. Greater independence could prevent election year business cycles from propping up otherwise weak executives. Since their own job wouldn't be on the line if the chief executive loses the election, the Finance Minister could make decisions that are wholly independent of their desire to "get the boss re-elected." Imagine the radical shift in government economic policy that could result from this relatively minor change.
 
It's at least worth considering.

Posted via email from skinnerlayne's posterous