Mark Carney chosen to head the Bank of England: Bold Decision Big Challenges Ahead

The Decision of the British government to appoint the Canadian central banker Mark Carney as the new Governor of the Bank of England , the crown jewel of central banks, is a bold decision by Chancellor George Osborne and PM David Cameron . It is a rare day indeed when Britain draws upon Canadian talent for one of the top jobs in the U.K. historically it is usually the other way around. But the financial crash and fragile recovery has changed all of that. Britain suffered severely in the aftermath of the crisis and many of its banks were either bankrupt or in serious trouble as a consequence of lax regulation, unbridled greed, incompetence, fraud and lack of sufficient regulatory oversight. Canada largely because of its long standing tradition of cautious prudence and deep distrust of the banks did not suffer the same sort of banking collapse as did Britain. Furthermore , its officials including Carney were quick to respond and tighten regulatory oversight. So Mark Carney’s reputation as a deft manager of the financial system and a top quality central banker rose along side that of Canada. Canada’s employment performance was also judge positively despite the fact that we suffered from a quite severe recession and unemployment rose to above 8 %. from 6 % in 2007. It currently sits at 7.4 %. It is higher in industrial heartland regions and places like Quebec , the Atlantic provinces and to a certain extent southern Ontario still have the feeling of being stuck in recession even though growth is positive. This is the kind of economy that Mark Carney has presided over. Carney comes from a financial markets background and as Gavin Davies suggests in his commentary on Carney’s appointment in the FT he was not regarded as a macro policy specialist or theorist so much as a financial markets specialist. It is these latter skills and talents and work experience 13 years with Goldman Sachs and his recent work on the Financial Stability group that were the basis of his attraction to the British. But Britain doesn’t just face the problem of of getting financial regulation right. It also has to deal with the very real problems and threat to economic recovery and employment posed by the problems in Europe and the contradictions of its own fiscal policy which has been strongly biased toward austerity and deflation at a time when stimulus is needed. So we shall see how Mr.Carney responds to these challenges. His appointment begins in July, 2013. By then the trends ought to be clear. In Canada Carney was a conventional monetarist who positioned himself pragmatically close to the centre of the Taylor rule monetarist consensus adopting an inflation target of 2 %. Actual inflation according to the most recent data has been running below that and there are signs of the Canadian economy slowing down. So despite his constant warnings of increasing interest rates in practice he kept the rate close to or at 1 % once he realized that rate reductions were required to prevent an even greater recession. The challenge in Britain is whether Carney will understand the potential great danger of combining excessive fiscal orthodoxy with monetary tightening and act appropriately, despite strong voices urging anti-inflationary orthodoxy. We shall see soon enough.


About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
This entry was posted in austerity, Canada, European debt crisis, European unemployment, fiscal policy, monetary policy, quantitative easing, treasury view, U.K. economy, Uncategorized, unemployment and tagged , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s