Over the period of two years, after Canadian Mark Carney left his post as the head of the Bank of Canada to take on the prestigious role as Bank of England governor, it was like he was jumping from the frying pan into the fire. The global economy continued on its roller coaster journey at the same time that global wealth was nesting comfortably within the management of less than 1 per cent of the population.
Carney was deemed a typical mild-mannered Canadian who would bring a sense of stability. So when he was asked to speak at England’s prestigious Guild Hall to the country’s elites no one was expecting anything out of the ordinary.. They should have been better prepared.
He surprised everyone when he launched into his view of how capitalism itself is at risk. “Just as any revolution eats its children, unchecked market fundamentalism can devour the social capital for the long-term dynamism of capitalism itself,” he offered at the beginning of his speech, to which the room grew deathly quiet.
Carney talked about how the affluent nations had subtly morphed from being market economies to market societies and how that fundamentally changed everything. He said he worried about the “mistrust” that was clearly growing between citizens and the global financial order..
Carney reminded his audience that six years after the economic crisis of 2007, the core problem remained, with little desire among the financial elites to remedy it. And the longer they took to address it, the more populists movements were growing, both in developing and developed nations, and they were getting increasingly angry. What else should we expect, he argued, “when bankers make enormous sums, while taxpayers pick up the tab for their failures.”
Governor Carney closed by stating that human beings matter. He found it ironic that in an age that has seen poverty getting better in the developing world there has also been a spread of new poverty in the affluent nations. He concluded with the belief that it is the loss at all levels of community, of social capital, that most threatens the world, and capitalism itself.
Two years later, Mark Carney spoke at another meeting of England’s elite, only this time his theme was different. Climate change was an immediate threat to financial system, he argued, and corporations, even small and medium-sized businesses, needed to acknowledge the risk immediately if the financial system was to avoid “catastrophic impact.”
The Bank of England governor challenged firms to do more to disclose their vulnerabilities. What did that mean? He informed bankers and insurers that they would need to provide more information about the risks they might face from climate change, Failure to do so would have damaging effects for financial stability.
The same finance industry that only a decade ago had helped to spur on the worst financial recession since the Great Depression had quickly returned to business as usual, even succeeding in helping get governments elected that oversaw further cutting in corporate tax rates and the dismantling of more cuts regulating the financial industry. The result, Carney noted, as a deepening of the divide between rich and poor in the developed world, high rates of unemployment, and a growing disenchantment with the financial barons who enjoyed their expanding life of elitism while most citizens endured stagnant economies. And then he threw down the gauntlet:
“The finance industry could be forced into making rapid adjustments if you don’t gradually expose where your climate change risks might lie, which could trigger steep losses, not only for your shareholders, but average citizens as well. The result could be chaos. Given the uncertainties around climate, not everyone will agree on the timing or scale of the adjustments required … [but] the right information allows sceptics and evangelists alike to back their convictions with their capital.”
In other words, it could be 2007’s Great Recession all over again, only this time hordes of citizens and less-friendly governments would likely demand on severe regulatory restrictions on the finance system and perhaps even jail time for financial leaders.
Instead of leaving his audience sullen and guarded, the governor made a suggestion: create growing opportunities for firms to finance the transition to a low-carbon economy. He said new technology investments and long-term infrastructure projects would need to be financed at roughly quadruple the current rate and they had the resources to do it when governments or their citizens didn’t.
As with the speech a couple of years earlier to the same crowd, Carney sat down following prophetic utterances that not only showed his human grasp of capitalism, but served as a warning that if economies are all about money and not people, then there is no way out of our present financial mess.
The following week, business magazines, conservative newspapers, corporate social media accounts, and even the spokespersons for bond and stock markets subtly panned Carney’s warnings. A week later his challenge had sunk like a stone below the surface, the ripples fading away as though nothing had happened. And so it goes … and so the worst comes.