Expensive talk on inclusive capitalism

On 27 May, Mark Carney, Governor of the Bank of England, gave a speech on the topic of ‘inclusive capitalism’ at a conference carrying the same name.  I can understand why he made it.  Once invited, there are risks to turning the invitation down.  Since Mr Carney is shortly (in central bank time at least) off to Canada with the presumed intent of assuming high political office, he can be taken to be already in pre-campaign mode.  Such a conference is the perfect platform to stake out a cuddly but free market position, and to appear statesman like and escape the nerdiness that can hinder those who linger in finance too long.  There are more genuine reasons to give the speech.  The Bank of England looks to some like the friend of the City, and this is a chance to counter that.  Occupy – assisted by the BoE’s new Chief Economist Andrew Haldane – charged that the financial crisis was in part caused by inequality (=exclusive capitalism).  So this is a chance to answer that charge, or explain what can be done about it.

But there are costs too.  Central banks don’t have questions of redistribution in their mandates.  In that sense, it’s none of their business whether capitalism is ‘inclusive’ or not. When they speak on topics outside their mandate, they – to indulge in central bank speak that it is hard to shrug off – run three risks.  The first is that they  politicise their jobs.  By which I mean that future office-holders will be selected to make sure that when they go off brief they do it in support of the sponsoring political party.  The second risk is that their reputation for doing what they are mandated to do impartially is tarnished.  (How can we trust this lot when they are so overtly ideological?).  Risk number three is that the institution gets cut down to size in the future, in a backlash against central bank autonomy, stripping out jobs that would normally be better left inside it.

In my opinion, central bankers should stick rigidly to talking about issues that are confined to their mandate.  Even if such comments are solicited – as they were of the previous Governor by the Government on fiscal policy – these invitations should be turned down.

As a parting shot, there are pecuniary costs too.  I reckon it must have cost at least £50k for Mr Carney to make that speech.  [Calculations at the end of this post].  Was it really worth it?  In this particular case the outlay might be deemed ironic in the midst of a conference on inclusive capitalism:  tax taken mostly from the poor so that someone already rich can look good!  (Granted I am caricaturing here).

Anatomy of the guessed £50k spent on speaking about ‘inclusive capitalism’

Suppose annual junior staff cost, including pension, of 100k a year.  30 days holiday, leaving about 235 working days.  Daily staff cost of about £425.  Governor time rated at 6 times that.  MPC/FPC time rated at 4 times that.   Senior staff time rated at 2 times.  Typical speech of this length would take 2 weeks of the Governor’s speechwriter’s time.  This would include writing time, meetings with suppliers,  meetings to collect comments.  The Governor himself might work on it for 5 days, conservatively, including writing, commissioning, rehearsing and so on.  A typical speech will involve commissions from junior staff outside the Governor’s office, that I reckon might conservatively be costed at 5 days.  Such a request will cause a flurry in the local area, as this is the chance for that area to excel and draw attention to themselves.   I have added 3 days for press office time, spread from the most senior to the junior lot who person the phones.  And 2 days of MPC/FPC time.  Supposing it takes 1 member an hour to read and comment on it.  And that 8 from the two committees have a go.  That seemed a fair guess from my experience.  The cost includes 3 days senior staff time commenting.  It’s essential to read and comment on all the speeches by the Governors.  Heads of Division are fighting for promotion on a rapidly flattening hierarchy and have to make themselves visible by doing this.  So this assumes that 24 of them spend an hour each doing it.   Which gets us to about £25k.   The true cost is probably much larger, (at least double ?) since each of these staff imposes an overhead on the organisation in terms of HR, IT, office space, etc.  So that gets me to £50k.  There’s a lot of guesswork here, but I am happy to be corrected.  The true cost of more substantive speeches, like set piece lectures on monetary policy or financial stability would, I guess be vastly higher, by a factor of 5-10.  So in this sense this one might be regarded as cheap, I suppose.

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10 Responses to Expensive talk on inclusive capitalism

  1. Giles says:

    Hi Tony

    Interesting post! If your calculations are right, a Governor speech is WAY more expensive than one from a Cabinet Minister. While people will chip in, a speech such as one given on Low Pay might get a couple of days of my time, a week by the speechwriter, and the usual email chains.

    Had the Bank suffered any of the administrative austerity that Whitehall has seen?


    • Tony Yates says:

      I don’t know: I haven’t seen inside Whitehall. The Bank experienced the same pay freeze, and the volume of work and hours worked I guess surged for the first two years of the crisis. But there were no obvious changes in procedures.

  2. Dan Davies says:

    I don’t think it would be usual to allocate out HR and overhead cost to a specific project like this. Also the Governor might have it on his desk for five days, but forty hours doing nothing but write the speech seems a bit much – I doubt that the Prime Minister spends that long on his annual conference speech.

  3. sdbast says:

    Reblogged this on sdbast.

  4. ma_ru_ku says:

    Much higher input numbers needed for an Andy H speech..

    • Tony Yates says:

      Yes, MUCH! Casting my mind back, I’d guess that some of them involved weeks of Andy’s own time. [Which we might cost at 3* junior staff time]. And a team of five junior people working for a month or two. Of course, those were different beasts. In his defence, you can argue that they did produce new insights (unlike Mr Carney’s recent work) and were not just central bank tap-dancing.

      • ma_ru_ku says:

        Yes, some hedonic adjustment needed. And internally seen as a major distribution channel for good staff work – either instead of or complementary to QB articles, etc.

  5. Russell says:

    The debates over Worker Exploitation is over: The final agreement is that everyone deserves a descent life in our world economy. Now comes the point where we need ideas to reach the goals we all agree are important. We can imagine better!

    But does that mean us lefties should shut up and let the SOB’s that brought us to this point lead the way to another arrangement, much like the one that brought us to this point? No we need some people in office that are willing to step into a New Economy. Lefties Unite and take as many mayoral and city counsel seats as possible….

    I don’t know about you, but this constant fighting between Workers and Owners has to stop and we can’t settle for another round of kicking this old can down the road. The only solution is to support Democratically Run Worker Ownerships.

    • Tony Yates says:

      I have two responses to this. Heartfelt gladness that ardour to make economies serve people lives. But profound scepticism. I don’t think there is any alternative but to have companies operate as ruthless commercial entities, privately owned, except where they shouldn’t be (!), regulated appropriately, and with a generous taxation system to redistribute to the unlucky and to fund genuinely public goods. Anyone who wants to form a cooperative can (and should be able to), but I don’t think anyone should dictate to anyone else that that is how they ought to organise production. As a mode of doing business, it sounds attractive, but it’s problematic too, as the recent history of the Cooperative movement in the UK shows, and as I infer from the rise and fall of the Mondragon cooperatives in NW Spain.

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