Long Road to Neoliberalism

Born in the Northwest Territories, Carney grew up in Edmonton, Alberta. In one of his book’s rare but telling personal asides, Carney describes himself, while on a speaking tour to schools in deprived areas of northern England, as a man from the ‘far North of Canada’. This self-portrait is presumably crafted for the purpose of seeming ‘relatable’, but it falls flat on that score.

Carney rose to global fame as the governor of the Bank of Canada from 2008 to 2012 before becoming governor of the Bank of England, a post he held until February 2020. He is currently the UN Special Envoy on Climate Action and Finance, and has been touted as a potential successor to Justin Trudeau as leader of the Liberal Party of Canada.

Few central bankers, current or former, get the same kind of press as Carney. His tenure at his first major post coincided with the Great Recession that had a devastating impact on much of the world but only put an inconvenient dent in the Canadian economy. In Britain, he endeavoured to steer monetary policy during the lead-up to the Brexit referendum of 2016 and its aftermath — a much more turbulent voyage.

The heft of Value(s) comes largely from parts one and two, which provide a history of theories of value and money as well as an overview of the crises unfolding from 2008 to the present. Carney as a historian is clear and concise. His writing of recent history also benefits from his front-row seat to the panicked machinations of the financial system.

Carney is keen to explore objective theories of value, which hold that goods and services derive their value from how they are produced. Proponents of these theories have included Adam Smith and Karl Marx, both of whom argued that labour was the ultimate measure of value. Carney contrasts such objective theories of value with subjective theories, whereby value ‘is in the eye of the beholder.’

Exchange value, Carney explains, determines underlying value. Value, in this analysis, is determined exclusively by the market. This is the logic that has emerged triumphant in our neoliberal era. ‘It is as if the price of everything is becoming the value of everything,’ Carney writes, haphazardly touching upon the original eloquence of Wilde.

As Carney points out, the company Jeff Bezos founded, Amazon, is worth $1.5 trillion—probably more since Carney sent his book to press—while the Amazon rainforest has no measurable value, despite acting as a carbon sink for the planet and hence constituting one of the vital lifelines in preventing catastrophic climate change.

A Moral Critique of Capitalism

Carney is not a free-market fundamentalist. Central bankers are most tested when financial markets are sputtering or outright crashing. They are, Carney explains, ‘lenders of last resort to banks in order to prevent temporary liquidity shortages from turning into solvency crises.’

He understands all too well that unregulated financial markets will periodically implode and cause human misery as a result. He is very proud, one senses, to have acted as a public servant when intervening in overheated markets and stopping crises from becoming catastrophes — that is, for financial markets themselves.

Pulling back from the day-to-day demands of central banking, Carney’s concerns are now even broader:

There is a growing sense that this basic social contract is breaking down. That unease is backed up by hard data. Within societies, virtually without exception, inequality of outcomes both within and across generations has demonstrably increased.

Carney wants our economies to be redesigned according to values of ‘fairness, solidarity, resilience, responsibility, sustainability, humility, and dynamism.’ He quotes Rabbi Jonathan Sacks, who asks, ‘How can we learn to be moral again?’ This is the moment at which some readers might throw up their hands. When was the capitalist economy ever moral in the first place?

Carney cites the detailed research of Thomas Piketty on the relatively low levels of taxation in the nineteenth century, which meant that governments provided little more than ‘nightwatchman’ functions to their citizens (police, court systems, armies, general administration, and not much else). Curiously, despite his focus on inequality elsewhere in the book, Carney entirely sidesteps Piketty’s more famous analysis of twentieth-century capitalism, which led him to formulate the famous equation r > g — when the rate of return on capital, r, is greater than the growth of the economy, g, inequality in society increases.

Piketty has argued that economic growth outpaced the rate of return on capital during capitalism’s post-WWII golden era, thereby delivering rising prosperity to millions. Governments, flush with money, were able to provide social goods to all classes. Huge numbers of people enjoyed better life prospects as a result.

In France, for example, as Piketty has shown, ‘between 1950 and 1983, incomes were rising steadily by almost 4 percent per annum for the immense majority of the population. On the contrary, it was the highest incomes which had to settle for a growth of barely 1 percent per annum’ (italics added). Similar trends were at work across all western countries — in the UK, Canada, United States, and so on.

Carney is not prepared to face the reality of our current predicament, as evidenced by the vast growth in returns to the rich compared with the postwar era. How could Bezos, Elon Musk, Mark Zuckerberg, and their fellow billionaires be convinced to become less rapacious and share more with everyone else? Why would the top 1 percent settle for 1 percent annual growth in returns on capital investment? And if they won’t settle for less, why would their bankers?

Carney writes in a moral register, but capitalism is not swayed by moral arguments. In a world fast reaching planetary limits to growth, bemoaning the lack of fairness in a system designed to lavish its spoils on elites seems deliberately obtuse.

Wishful Thinking

Carney deplores the results of neoliberalism but praises the two politicians who presided over its birth:

The Thatcher–Reagan revolution fundamentally shifted the dividing line between markets and governments. To be clear, this change of direction was long overdue following the steady encroachment of the state into market mechanisms.

Forty years later, Carney sees the pendulum as having swung too far in the neoliberal direction. He argues that all important market actors should adopt the values of fairness, solidarity, resilience, responsibility, sustainability, humility, and dynamism. One practical example of this would be ‘purposeful companies’ that ‘measure and create value for their stakeholders and for society.’

This is a popular concept among the progressive-minded elites of today, who believe that companies can generate profit without undermining social or environmental benefits. It also has a long history by this stage. Bono’s Product Red initiative was promoting the idea of ‘ethical consumerism’ a full fifteen years ago. The purveyor of outdoor gear, Patagonia, is one would-be exemplar of ‘conscious capitalism’ as a certified ‘B-Corp’ — a firm that is supposed to display a higher standard of transparency, accountability, and performance.

Even if we grant that ethical companies can exist, what about the remaining unethical ones which are still causing massive social and environmental problems? The duty of publicly traded corporations is to create shareholder value, of course. Carney suggests that this aim is fading in importance compared to others, but without providing much evidence to back up his case.

At one point, Carney informs us that the Anglo-Dutch food company Unilever has had a Sustainable Living Plan since 2010, with annual reports on its efforts to improve the state of the world. Yet even a cursory glance at Unilever’s record tells a very different story.

In 2017, Unilever announced a ‘radical recycling process’ that would enable ‘hard to recycle’ plastic containers—for ketchup, shampoo, toothpaste, etc.—to be converted into new products. But when Reuters investigated Unilever’s pilot recycling plant in Indonesia earlier this year, it found that Covid-19 had disrupted its operations. The company refused to provide any information about the success of its much-hyped recycling experiment.

Capitalism rewards, disciplines, and punishes firms. Its ultimate driving force is always the same: maximizing returns on investment. Its relentless pursuit of that goal, regardless of human or environmental consequences, make its closest human analogue a sociopath. As Simon English points out in his review of Value(s) for the Evening Standard:

Business leaders have been paying lip-service to this stuff for ages, certainly before Covid-19. And it is not clear to me that even the death of the planet is motivation enough for them to genuinely budge, to accept less (of anything).

Overall, Carney’s Value(s) amounts to a PR exercise for today’s capitalist elites, helping burnish their image, whose prescriptions will do little good for anyone else.