Value(s) without Value

Mark Carney, then-Governor of the Bank of England, in 2020. (Peter Summers/Pool via Reuters. Book cover via Amazon)
A review of Value(s) by Mark Carney

In his recent book, Value(s), Mark Carney claims we have moved from a market economy to a market society that overvalues money and private goods while systematically undervaluing 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 for climate action and finance, argues that “every financial decision [should take] climate change into account.” The hackneyed argument that our society produces too many private goods at the expense of public goods dates back to at least 1958, when the liberal economist John Kenneth Galbraith, also Canadian-born and a regular foil on Firing Line for decades, published his book The Affluent Society.

Carney acknowledges that “both value and values are judgments. And therein lies the rub.” The problem is choosing what values should be incorporated into decision-making. Carney argues the values that need to be accentuated came to the forefront during the pandemic, including “solidarity, fairness, responsibility and compassion.” That’s one way of looking at it. Others, however, might argue that the pandemic brought out the worst of human nature: policy-makers selfishly shifting mountains of debt onto future generations, nations hoarding medical supplies for their own people, bureaucratic incompetence slowing vaccine rollout in the EU and Canada, racial hatred directed at Asians, a shortening of global supply lines that will damage emerging nations for years. The list goes on.

Stealing other people’s pets has become so common that Time magazine ran a story on “dognapping.” The problem with values is that there is no assurance the best ones will rise to the top, especially in a crisis.

It is revealing to compare the values Carney claims are necessary to repurpose our economic and financial systems with those that the Nobel prize–winning economist Edmund Phelps shows are key to innovation and economic growth. Carney lists fairness, solidarity, resilience, responsibility, sustainability, humility, and dynamism. Phelps emphasizes independence, initiative, achievement, and acceptance of competition. Carney’s values are arbitrary and politically motivated, while Phelps’s are validated by both the historical evolution of innovation and statistical evidence. Carney’s shallow analysis hardly justifies his cover flap’s boast that he is “one of the great economic thinkers of our time.”

It would not be a shock to economists that a former central banker holds a jaundiced view of the functioning of free markets. The nature of their profession makes most central bankers skeptical of the functioning of markets, since their very existence is premised on the need to correct intermittent but recurring financial-market failures. Central banks are responsible for heading off financial panics and bank runs. It’s no surprise that a mandate to spot and extinguish fires in the financial sector makes central bankers susceptible to a cynical assessment of how markets operate. Veteran police officers can often develop a misanthropic view of human nature after years of witnessing its worst manifestations.

That said, Carney goes far beyond the usual central-banker misgivings about the functioning of free markets, preferring instead to subscribe to narratives widely shared by the Left. In Value(s), Carney rewrites his own account of past events to fit today’s liberal narratives. A prime example is 2008’s Great Financial Crisis. At the time, he diagnosed its origin as “a fundamental repricing of risk,” suggestive of a severe but isolated malfunction in markets. However, today Carney shifts the blame to “a crisis of values” and a misalignment of incentives, which fits his narrative that the heart of capitalism is fundamentally rotten because self-interest blinds us to broader social problems.

However, excessive self-interest is hardly unique to the private sector. There is copious research from public-choice theory about how government bureaucracies increasingly pursue their own interests at the expense of the broader public good. Also overlooked is that morality is both an input and an output of capitalism. Carney quotes Adam Smith’s prescription that high levels of honesty and trust are necessary for markets to function but ignores the way that capitalism encourages independence, self-reliance, accountability, competition, and originality that create both better people and better products.

Value(s) outlines a role for government meddling in markets to guide the transition to sustainable jobs in industries such as autos, energy, and IT because these things “don’t just happen.” Certainly things “don’t just happen,” but they often happen without government intervention or guidance. Carney later cites the rise of Amazon to dominate retail or Uber in transport without realizing they demonstrate that innovation occurs despite, not because of, government. The inability of governments to identify and guide disruptive innovation is on full display every time you connect to the Internet, which for decades was a little-used network for academic researchers before the private sector activated its potential for ubiquitous use.

The growing commodification that attaches a price to everything and “increasingly governs the whole of life” is repeatedly decried in Value(s). However, even ignoring the exaggerated claim about marketization, the only obvious replacement for market prices is arbitrary valuation by elites, of which one example might be Carney. Given a choice between the collective wisdom of markets and Carney’s elitism, most people would agree with the principle contained in William F. Buckley Jr.’s assessment, “I would rather be governed by the first 2,000 people in the telephone directory than the Harvard University Faculty.”

Carney blames market prices for the “growing exclusivity of capitalism and the rise of populism.” On the contrary, the “Yellow Vest” populism in France was ignited by rising taxes on fuel favored by policy-makers such as Carney, who obsessively attack climate change without much regard for the impact of the policies they advocate on the working class. More broadly, lamenting growing inequality simply does not square with the easy-money policies of Carney and his fellow central bankers. Record-low interest rates and repeated bouts of quantitative easing have helped inflate assets prices, enriching a privileged few while doing little for working-class people who lost their jobs.

Carney’s forte is an exceptional ability to communicate. However, this strength becomes a liability when coupled with an inability to get even basic facts right. This is strikingly obvious when Value(s) 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 Value(s)).

The toxic combination of an extraordinary ability to communicate and a lack of attention to detail has long plagued Carney’s pronouncements. Thus, in 2012, he introduced “dead money” into the lexicon of the Left by accusing firms of building cash reserves and not investing and spending more in the aftermath of the Great Financial Crisis. Unfortunately, the whole notion was based on erroneous data, compounded by a failure to understand why firms concentrated on repairing balance sheets after the worst financial crisis since the 1930s. Carney quickly made a half-hearted attempt to recant his musings by claiming dead money had later been “resurrected.” However, the idea that hoarding cash inside firms helps explain slow economic growth after 2008 became a bedrock of the left-wing critique of the evils of capitalism in the decade after the financial crisis. Coming from the central-bank head of a G7 country, Carney’s statement lent precious gravitas to an idea whose flaws were fully exposed during a pandemic that favored firms that had carefully built robust balance sheets. Carney does not devote even one of the 600 pages of Value(s) to addressing the dead-money fiasco, presumably because the narrative it spawned serves his purpose of undermining faith and trust in capitalism.

Carney likes to cite the story of removing Montagu Norman’s portrait from the Bank of England (Norman was the governor who convinced Churchill to restore the gold standard at prewar parity, plunging Britain into a prolonged recession). Carney soon received a call from George Osborne, then chancellor of the exchequer, asking if Osborne could borrow the picture to hang in his dining room. Asked why he wanted to do so, 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 heed Osborne’s advice when pondering Carney’s critiques of markets and values.

Philip Cross is a senior fellow at the Macdonald-Laurier Institute and author of An Entrepreneurial Canada? Understanding Canada’s Chronic Lack of Innovation and How We Can Fix It.


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