Mark Carney: ‘The more a country asks of its citizens, the greater their devotion to it’

Former governor of the Bank of England suggests how to fix financial system

Mark Carney has been on quite a journey. Born in a small town in Northern Canada, schooled in Edmonton, Alberta (St Francis Xavier High School), then Harvard and Oxford. A doctorate with “300 equations and a lot of game theory” probably helped him negotiate the corridors of financial power at Goldman Sachs, his next stop.

As with many Goldman alumni, Carney moved into government. Stints at the Canadian finance ministry and central bank established his reputation: he had a good financial crisis. In 2008, he cut interest rates at around the same time the ECB was hiking. Only one of those decisions was inspired. Canadian banks were tightly regulated. European banks, not so much.

George Osborne, UK chancellor of the exchequer, came knocking. He persuaded Carney to be governor of the Bank of England. He was reluctant at first, but assumed office in 2013. It’s been a year since he left.

Clearly not a man for putting his feet up, Carney has become a UN envoy on climate change, a vice-chairman at Brookfield Asset Management, a leading environmental investor, and a non-executive director at Stripe – currently the most valuable private company in Silicon Valley. He’s also written a book, called Value(s).

Earlier this month, we spoke on Zoom, about the book and much else besides. His publisher warned we would have just 40 minutes but we chatted for more than an hour. He is the epitome of a charming, urbane member of the global super-elite.

Carney is acutely conscious of his Irish roots. A grandparent emigrated to Canada from Mayo about a century ago, a story recounted in the book. Two other grandparents followed a similar path. The only change he made to the grandiose office granted to the boss of the Bank of England was to put an old map of Mayo on the wall. He obtained Irish citizenship in the late 1980s, a process that revealed a great grandparent that could “only put his mark on baptismal documents.”

“That Irish heritage is a big part of who I am,” he says.

Carney talks about the importance of luck and acknowledges his own good fortune – “‘a great grandfather with no schooling and a father who was a university professor”. That thought, he says, “helps keep me grounded… it’s very easy to think yourself very grand as governor of the Bank of England”.

One of the values that Carney repeatedly mentions is humility. But that doesn’t get in the way of ambition. The book’s subtitle is “how to make the world a better place”.

Dark side of capitalism

He wouldn’t like me saying this, but this is a 600-page manifesto in the tradition of Keynes who worried greatly about the flaws, instabilities and dark side of capitalism. Carney, like Keynes, but unlike Marx (who gets a lot of mentions, not all critical ones), wants to save the system from itself. Revolutionaries will be disappointed but shouldn’t be surprised.

It’s a big book, in all senses of the word. I enjoyed all 218,000 words of it: it’s a brilliant call to arms. How to rescue the modern – western – world from its crisis-prone nature, without falling for the thesis that it’s all so broken it needs tearing down. It’s commonplace to assert that the political centre has been eviscerated by the rise of both extreme left and right. Carney supplies a welcome antidote and makes a heroic and compelling case for the restoration of that centre.

Value(s) is part-memoir of a central banker, part-history lesson, part-economics treatise, part-checklist of the things we need to do to make things better. A key idea, referenced by that parenthetical S, is that slavish adherence to market values (prices) has changed the social contract.

Carney traces a line from Aristotle, through Rousseau to Sandel, whom he quotes: “The more a country asks of its citizens, the greater their devotion to it… civic virtue is built up, not down.” JFK would have nodded. Slavish adherence to market values, in Carney’s view, risks undermining civic virtue. Unsurprisingly, Wilde’s aphorism, knowing the price of everything but the value of nothing, gets a mention.

The economics discussion is a blast from my past, an excursion into value theory embracing Greek philosophers and Classical economists like Smith, Marx and Ricardo. Critics lament that this stuff isn’t taught any more and the “mathiness” of today’s economics journals has taken the profession in a wrong direction.

Do some economists now stand accused of possessing the wrong values, whether slavish adherence to “physics envy” means the right questions aren’t even asked? Adam Smith is referenced here, the first “modern” economist: Carney notes that The Wealth of Nations, Smith’s most famous work, needs to be accompanied by a lesser-known treatise, The Theory of Moral Sentiments. Does the way economics is taught today contribute to the crisis of values? “I definitely think it has,” he says.

He is quick to add that the profession is getting better: he is encouraged by use of big data and the burgeoning behavioural economics literature. “What’s still lost is that sense of economic history… and the history of economic thought.”

What would Carney say to Trump voters? He ducks the question – probably too political – by describing one of the book’s main objectives: “how to build an inclusive economy for all.”

I interpret that as meaning if you create that inclusion, extremists wouldn’t get so many votes. “Bring everyone up, not just a subset,” he says. Carney quotes Pope Francis, “you see more clearly from the periphery”, meaning that perspective is everything, particularly that of “the unemployed… or the oppressed”.

Global financial trouble

Carney takes us through our three great crises: finance, health and climate. Analysis is combined with anecdote and there is much to learn, even for those of us who think we know everything about one or all of these.

We hear about an early warning of global financial trouble coming from an obscure corner of Canadian money markets, which Carney and his colleagues were able to deal with. “Success is an orphan” he forcefully reminds me, suggesting that there was a lot going on, a financial iceberg with only its tip visible to mere mortals, terrifying though that glimpse was. I knew that the system came close to complete meltdown but I hadn’t realised just how close to the edge we were.

A section on money leads us into Bitcoin. He’s not a fan, but acknowledges that we are at the start of “a revolution in money”. Digitalisation is changing everything. He doesn’t like my idea whereby all of us bypass the banks and have our accounts at the central bank. “Who would do the lending?” I suggest that algorithms and AI would do a better job than banks. He isn’t convinced but admits that things are going to change.

He recently joined the board of Stripe, which was founded in Silicon Valley by Irish brothers Patrick and John Collison. A recent $600 million fundraising has placed a value of $95 billion on the payments groups, making it one of the most valuable private companies in the world.

Can he see how some would say this is another example of “gamekeeper turned poacher”, a regulator cashing in?

“There are lots of institutions I would never have joined...those that I directly regulated… there are thousands of those and it wouldn’t be appropriate... I never regulated Stripe... an innovator and a facilitator of a more inclusive financial system… one that can help with zero carbon fulfilment.

“I do know finance and I want to apply that knowledge in a way that will make a difference, in a way that is consistent with the my values, particularly dynamism, inclusivity and sustainability.”

Given all the misbehaviours of the finance industry, going back centuries and with the contemporary domestic example of Davy, what does this tell us about “values” in that industry and how fixable is it? “Lessons can be learned, governance can be improved and regulations tightened… things are better than they were but far from where they need to be and this is one of the reasons why I wrote the book.”

There is a hint of concern about a key part of that sector: “the way the whole asset management complex is designed and the instability in that regard”.

Values

The Covid-19 pandemic revealed our lack of resilience, a key Carney value. He touches on the connections between values and our Covid response. The least corrupt countries on earth did better.

“Confidence in government matters, particularly with respect to compliance with restrictions. Effective leadership requires competence.” What about zero-Covid? “The challenge is that Covid isn’t over until it is over everywhere unless one’s really intending to keep this model [zero-Covid] until the end of time.”

Carney wears many environmental hats, including advising the UK government about its role as host of the upcoming COP26 conference in Glasgow.

While the book rehearses all of the data and the scientific consensus in exemplary fashion, climate warriors have a communication problem. It’s all so depressing and the temptation is to look away. Could communications be better?

“There is, with a caveat that we have to be careful… but there are big moves afoot... the objective [zero carbon] has been elevated... this has become a fundamental issue of competitiveness.”

Part of the suggestion is that there are now incentives for the private sector to get involved, perhaps even to make money. National security, even in China he suggests, is adding to pressures on governments to act.

Value(s) confronts our broken system head on and suggests ways of fixing it. If we don’t implement something like Carney’s manifesto – the centre, already wobbling, risks collapse.

Cynics will say Carney’s core values of solidarity, fairness, responsibility, resilience, sustainability, dynamism and humility look like an aspirational wish-list that any member of the global super-elite would ask the rest of us to follow.

But modern cynics don’t believe in the possibility of unselfishness, they are a far cry from the original Greek school of thought that said the purpose of life is to live in virtue. This is an important book, deserving of a wide audience. We know things need to change and that we are in big trouble if we don’t. Carney deserves to be taken seriously.

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