[Mouse over or click for a transformation. Mark Carney photo by Sean Kilpatrick/CP. Transformation by Paul Watson]
David Bowie’s instrument song, “A New Career in a New Town,” is an apt overture for Mark Carney’s next professional phase as he embarks on his new gig as Governor of the Bank of England July 1.
While expectations are high—perhaps too high—that our former central bank governor can fix the U.K.’s economic woes, he should take a cue from the chameleon-like creator of Ziggy Stardust. While Bowie has continually changed his musical style to suit changing times, Carney must reevaluate and reinvent his talents: success here in Canada matters little for what awaits him in London.
Carney, known as the rock star of central bank governors, has been feted as a Canadian monetary godsend, whose work as our own bank governor kept Canada from falling into the abyss of the 2008 financial crisis, a catastrophe which is still roiling British society.
The Evening Standard says the “capital is in the clutches of a consuming Carney crush.” While Chancellor of the exchequer George Osborne (we say finance minister) called Carney the “outstanding central banker of his generation” and pursued him even when Carney at first turned down the role. The 49-year-old’s youth, good looks, intellect and mercurial communication skills will no doubt shake up the Bank of England—the Old Lady of Threadneedle Street—just when it’s most needed.
Most agree Carney is the man best equipped to clean up the economic train wreck that will be overflowing his inbox on day one, grappling problems including, but not limited to, extraditing the U.K. from a recession, holding down inflation, tinkering with the value of the pound, reforming the banking sector and dealing with the bank’s new responsibilities, like the U.S. Federal Reserve. But doubts linger as to what the boy-economist from Fort Smith, N.W.T., can really accomplish.
One of the raps against Carney is that his reputation as Canada’s bank governor in no way prepares him for what awaits. While Carney’s move to drastically cut interest rates in Canada at the beginning of the financial crisis was prophetic, Philip Aldrick of the Telegraph likens the situation to Canada being an innocent bystander to a horrendous car crash with the U.K. economy at the wheel: the enormity and complexity of the economic problems Carney will face are on a whole different level. Five years on, inflation is a millstone, and few can agree on whether quantitative easing is the right antidote for the U.K. Moreover, one of his most immediate tasks will be whether to break up the Royal Bank of Scotland, and his decision in this area will be harbinger of the Bank’s policies toward the whole U.K. banking industry—policies that will have global reverberations.
Even deciding whether or not Jane Austen’s sour face goes on the tenner—critics say more women, besides Her Majesty, need to be represented on currency—will be a lesson in England’s hyper-sensitivities about its equality and heritage.
The dynamics of the Bank of England’s decision-making process may also test Carney’s negotiating skills. In Canada, Carney’s word was a law unto itself. In the U.K., the nine-member Monetary Policy Committee decides a course of action by consensus, with each member having a single vote. Indeed, the committee has been notorious for voting against the wishes of the current governor, Sir Mervyn King. The outgoing governor’s wishes have been stymied five times in a row by the MPC, most recently this month when the governor’s plan to inject a further £25 billion into QE was turned down by the majority. Carney is a good talker, but it’s unknown how he’ll fair dealing with other high-powered members of the committee, or how he’ll react if he can’t get his way. While extracting the U.K. from its recession may be a tremendous challenge, Carney’s biggest fight may come with four independent committee members appointed externally.
Working in Carney’s favour is timing. His injection of funds into the Canadian economy came at exactly the right moment, and his reign as U.K. bank governor now comes when there are faint indicators of a recovery in the British economy, with positive news on unemployment and inflation. If these trends continue, Carey will have a different but equally difficult situation—much like Bernanke in the U.S.—of weaning the country off QE without adding more jolts to the economy and propelling it to ‘escape velocity.’ And if the U.K. economy rises like Lazarus, Carney’s messianic skillset will be unquestioned.
And then there’s Fleet Street. While Carney is a media darling now, the prying and catty British media will take some adjustment. The closest he has gotten to a scandal in Canada was being a guest at Scott Brison’s cottage. Already, the U.K. press has pounced on his wife’s tweet about the availability of a decent home in the city—in reference to French tax exiles leaving, and perhaps easing, the sky-high housing costs in London. Ms. Carney’s tweet may have unintentionally rankled the Brits, as her husband is receiving a generous housing bonus for his new position, something that hadn’t been allotted to previous governors. While she may have come across as privileged and entitled to those on the left, she is also being eyed suspiciously by the right. Because of her work with think tank Canada 2020 and reviews for environmentally-friendly products, the Telegraph has labelled her an eco-warrior who thinks ‘banks are rotten.’ While Diana Carney may be expecting this sort of welcome as a Brit herself (she met Carney when they were both at Oxford), discovering his family is tabloid-fodder won’t come easy for her hubby.
Perhaps this is why the new guv chose not serve for the customary eight-year term, but rather a more manageable five year stint. That will bring him back to Canada in 2018-ish at the age of 54, still young enough to begin a new career in the more sedate world of Canadian politics.