The Governor’s eyebrows and the climate

This post is a repeat of many before, and consolidates Tweets from yesterday that were picked up in the FT story by Ferdinando Giugliano.

We’ve now had speeches from the BoE urging inclusive capitalism [Carney], on the benefits of volunteering [by Andy Haldane], and, recently, on urging government action to prevent climate change [Carney again].

This latest speech on the climate is, in my view, another example of overreach.

In that speech Mark Carney not only explained how long-term climate risks could impact on finance (which is fine), but also urged government action to prevent it (which is not ok, whatever the merits of that government action).

As always, there are three broad concerns.

First, the BoE, under fire for its handling of the economy before and during the crisis, and loaded up with many new responsibilities, must be sensitive to charges that it is already too powerful and unaccountable and too complex a body to manage well.  Overreach of this sort risks a bout of wing-clipping by some future regime that thinks the Bank has too much to do already, in which things it really should be doing are taken off it.

And it risks criticism of lack of focus, should any of its core goals not be achieved, even if such misses were unavoidable.  [Jonathan Portes’ critique gets at this, paraphrased as, ‘since you are missing your inflation target, this is no time to chide others for not hitting their climate target’.]

Getting involved in issues outside its large remits complicates the debate over critiques like those from the new Labour team that the BoE should pay heed to poverty and inequality, which most sensible people would also regard as off-limits.  If climate is on mission, then why not these other things?

Finally, there is a risk of politicising the job.  In the sense that, if a government expects the next governor to speak widely on matters of social concern, they will be selected so that their views on these other matters fit with government policy, and not on their expertise, and capacity to marshal that of others, on money and finance, which ought to be the sole qualifications for the job.

If urging action on climate change is part of the job, what next?  Why not issue a plea to OPEC to make sure the taps are kept turned on to aid monetary and real economy stability in the West?  Or urge support for a middle East peace settlement to eliminate the risks of military and migration catastrophe that would also threaten the UK and its financial sector?  Or push for multilateral nuclear disarmament to clip the tails of asset price distributions?


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5 Responses to The Governor’s eyebrows and the climate

  1. Ben Birnberg says:

    Well done Tony. Absolutely valid critique


    Date: Thu, 1 Oct 2015 12:37:26 +0000 To:

  2. A P Webster says:

    Is there a clear line between appropriate political interventions and inappropriate political interventions for a Governor? If it is acceptabele to explain “how long-term climate risks could impact on finance” to the extent of causing a financial or economic crisis, but not acceptable to implore the government to avert this potential crisis, then it is a very fine line indeed that Dr Carney has overstepped.

    Is it practical to entirely avoid “politicising the job” given how so many BoE initiatives and activities are political (if not Party Political) matters? Income inequality, house prices, and even the appropriate level of the inflation target are all political issues, but they are also factors in ‘maintaining monetary and financial stability’, to borrow the Bank’s preferred statement of its mission.

  3. mrkemail2 says:

    I actually agree with you! Totally right.

  4. eurogate101 says:

    Really, whether Carney or Haldane and state the blooming obvious about climate change and volunteering, nobody really cares. They might as well say do not the cross the busy road, and apple pie tastes great. Every time you say something slightly controversial, it is going to be political. Which is pretty much every time people open their mouths to say anything.

    More importantly is what they say, and which does not get mentioned.

    How about this:

    “Only last year Andrew Haldane, chief economist at the Bank of England, told the German magazine Der Spiegel that the balances of the big banks are “the blackest of black holes”. Haldane is responsible for the stability of the financial sector as a whole. He knowingly told a journalist that he couldn’t possibly have an idea of what the banks have on their books. And? Nothing happened.”


    So what do you say to this, Tony?

    Should we not have a little post about the black holes in banks’ balance sheets, which we know nothing about?

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