Book Review: ‘Wert (e)’ by Mark Carney


Mark Carney, then Governor of the Bank of England, in 2020. (Peter Summers / Pool via Reuters. Book cover via Amazon)

A look back at Values) by Mark Carney

In his current book, Values), Mark Carney claims that we have moved from a market economy to a market society that overestimates money and private goods while systematically underestimating public goods such as the environment and public infrastructure. Carney, the former Governor of the Bank of Canada and the Bank of England and now the United Nations Special Envoy on Climate Change and Finance, argues that “every financial decision” [should take] Take climate change into account. “The hackneyed argument that our society produces too many private goods at the expense of public goods goes back at least to 1958, when the liberal economist John Kenneth Galbraith, also a native Canadian and a regular forerunner, on Line of fire published his book for decades The affluent society.

Carney recognizes that “both value and values ​​are judgments. And that’s the catch. ”The problem is choosing which values ​​to use in the decision-making process. Carney argues that the values ​​that need to be emphasized have come to the fore during the pandemic, including “solidarity, fairness, responsibility and compassion”. That is a point of view. However, others could argue that the pandemic brought out the worst in human nature: politicians selfishly shifting mountains of debt to future generations, nations hoarding medical care for their own people, bureaucratic incompetence, introducing vaccines in the EU and Canada slowed down, racist hatred against Asians, a shortening of global supply routes that will damage emerging countries for years. The list goes on.

Stealing other people’s pets has become so common that Time The magazine had a story on the subject of “Dognapping”. The problem with values ​​is that there is no guarantee that the best will rise to the top, especially in a crisis.

It is instructive to compare the values ​​Carney claims to repurpose our economic and financial systems with those shown by Nobel Prize-winning economist Edmund Phelps are keys to innovation and economic growth. Carney enumerates fairness, solidarity, resilience, responsibility, sustainability, humility and dynamism. Phelps emphasizes independence, initiative, performance and acceptance of the competition. Carney’s values ​​are arbitrary and politically motivated, while Phelps’s are corroborated by both the historical evolution of innovation and statistical evidence. Carney’s superficial analysis barely justifies his envelope flap that he is “one of the great economic thinkers of our time.”

It wouldn’t come as a shock to economists that a former central banker has jaundice about the workings of free markets. The nature of their profession makes most central bankers skeptical about the functioning of markets, since their existence rests on the need to correct temporary but recurring financial market failures. Central banks are responsible for fending off financial panics and bank runs. Unsurprisingly, a mandate to identify and put out fires in the financial sector leaves central banks vulnerable to cynical assessments of how markets work. Veteran police officers can often develop a misanthropic view of human nature after years of witnessing its worst manifestations.

However, Carney goes well beyond central bankers’ usual concerns about the functioning of free markets and prefers to endorse narratives widely circulated by the left. In Values), Carney is rewriting his own account of past events to fit into today’s liberal narratives. A prime example is the Great Financial Crisis of 2008, when he diagnosed its origins as “a fundamental reassessment of risk,” suggesting a serious but isolated malfunction in the markets. Today, however, Carney blames a “crisis in values” and misalignment of incentives, which fits his narrative that the heart of capitalism is profoundly rotten because self-interest blinds us to broader social problems.

Excessive self-interest, however, is hardly an isolated case in the private sector. There is extensive research in public choice theory into how state bureaucracies are increasingly pursuing their own interests at the expense of the broader public good. It is also overlooked that morality is both an input and an output of capitalism. Carney quotes Adam Smith’s recipe that high levels of honesty and trust are necessary for markets to work, but ignores the way capitalism promotes independence, self-reliance, accountability, competition, and originality that both better people and better ones Produce products.

Values) outlines the role of government in meddling in markets to guide the transition to sustainable jobs in industries like automotive, energy and IT, as these things “don’t just happen”. Of course, things “don’t just happen”, but they often happen without government intervention or guidance. Carney later cites Amazon’s rise to dominate retail or Uber in transportation without realizing that innovation is happening in spite of, and not because of, the government. The inability of governments to identify and manage disruptive innovation becomes apparent every time you connect to the Internet, which was an underutilized network for academic researchers for decades before the private sector activated its potential for ubiquitous use.

The growing commodification, which puts a price on everything and “dominates the whole of life more and more”, is denounced again and again Values). Yet even if one ignores the exaggerated claims about marketing, the only obvious substitute for market prices is arbitrary elite valuation, of which Carney could be an example. Before choosing between the collective wisdom of the markets and Carney’s elitism, most people would agree to the principle stated in the assessment by William F. Buckley Jr University Faculty. “

Carney blames market prices for the “growing exclusivity of capitalism and the rise of populism”. On the contrary, the “yellow vests” populism in France was sparked by rising fuel taxes, favored by policymakers like Carney, who obsessively attack climate change without considering the impact of their policies on the working class. More generally, lamenting growing inequality just does not fit in with Carney and his central bank colleagues’ policy of making money easy. Record low interest rates and repeated quantitative easing have helped drive asset prices up, enriching the privileged few while doing little for the jobless working class.

Carney’s forte is exceptional communication skills. However, that strength becomes a burden when coupled with an inability to get even basic facts right. This is strikingly obvious, though Values) identifies his successor at the Bank of Canada as Tiff Macklem instead of Steve Poloz (Macklem took over from Poloz in 2020, although Poloz is never mentioned in Values)).

The toxic combination of exceptional communication skills and lack of attention to detail has long plagued Carney’s remarks. In 2012, for example, he introduced “dead money” into the lexicon of the left by accusing companies of building up cash reserves and of not investing or spending any more after the Great Financial Crisis. Unfortunately, the whole idea was based on flawed data, made worse by a lack of understanding of why companies focused on fixing balance sheets after the worst financial crisis since the 1930s. Carney quickly made a half-hearted attempt to retract his reasoning, claiming that dead money was later “resuscitated”. However, the idea that corporate cash hoarding helps explain slow economic growth after 2008 became a cornerstone of leftist criticism of the evils of capitalism in the decade following the financial crisis. Carney’s statement, from the central bank chief of a G7 country, gave valuable weight to an idea the flaws of which were fully exposed during a pandemic that benefited companies that had carefully built solid balance sheets. Carney doesn’t even dedicate one of the 600 pages of Values) addressing the dead-money fiasco, presumably because the narrative it spawned serves its purpose to undermine belief and confidence in capitalism.

Carney likes to cite the story of the removal of Montagu Norman’s portrait from the Bank of England (Norman was the governor who convinced Churchill to bring the gold standard back to pre-war parity, plunging Britain into a prolonged recession). Carney soon received a call from George Osborne, then Chancellor of the Exchequer, who asked if Osborne could borrow the picture to hang in his dining room. When asked why he wanted to do this, Osborne said the painting would remind him “never to listen to the advice of the Governor of the Bank of England”. Readers would do well to follow Osborne’s advice when considering Carney’s criticism of the market and values.

Philip Cross is a Senior Fellow at the Macdonald-Laurier Institute and Author of An Entrepreneurial Canada? Understand Canada’s chronic lack of innovation and how we can address it.


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