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?