On Carney’s Middling Record

An Examination Of His Actual Capacity

I am, admittedly, not a fan of Mark Carney’s. That is relevant detail to my political opinions, but I do think it’s fairly important to make clear the nature of my disdain for the former Bank Of Canada and Bank Of England Governor. I think his candidacy for leader would be a mistake on political grounds, yes. I also think his record is far less robust than many think.

The case that the Liberals bringing in Carney is a good thing is based on the idea that he knows what he’s doing and is a strong economic mind. But, I’m not sure that stands up to scrutiny. Mike Moffatt first called for looser monetary policy than the Carney Bank of Canada was willing to implement in mid-2012, and for 4 years both during and after Carney’s tenure the Bank of Canada proclaimed that we were due a return to neutral economic circumstances that didn’t come.

The idea that Carney is some sort of economic savant, however, beggars belief - and is certainly not backed up by the facts. And that’s bad news for those who want Carney’s presence in Liberal politics to help turn the ship around.

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“Mark Carney can fairly claim not to have botched the task that was given him, with the caveat that the task he was given was easier than those facing his counterparts in Washington, Frankfurt and London.

Even so, Carney’s departure shouldn’t be accompanied with triumphant fanfare and “Mission Accomplished” banners. Inflation has been running below target, recent economic growth has been sluggish, and the housing sector has been tapped out as a source of growth.”

That, from Stephen Gordon, was his initial reaction in the wake of Mark Carney’s exit as Bank of Canada Governor in 2013. It’s an assessment that is fair to Carney’s accomplishments, but also acknowledges the fact that his tenure left the Canadian economy in a pretty shitty spot. His introduction of Forward Guidance, and the guidance that rates were more likely to tighten than loosen, led to missed growth that could have strengthened the economy in the run up to the eventual oil price crash of 2014.

Upon entering the Bank Of England, Carney of course introduced Forward Guidance there - and promptly fucked up. His first issuance of guidance was that a fall in unemployment to 7% would necessitate a rise in interest rates, which failed to happen. Carney assumed that fall in unemployment would necessitate a rise in wages, which never came. Not great to enter a job and then immediately fail, especially when it meant getting hauled in front of the Treasury Select Committee and being called out.

More significantly, his tenure at the Bank of England - outside of the very initial decisions around COVID, which are impossible to judge him on (he left the Bank March 15th, 2020) - was marked by mediocre growth rates and caution. Of the 6 years he was fully in charge of the Bank of England, the UK had GDP growth above 2% twice. By GDP per capita, he hit 2% on the nose once and exceeded 2% one more time, but in the other four years he failed to hit 1.5%. And this entire time Britain was within the EU and the European Economic Area (otherwise known as the Single Market).

Obviously, the act of voting for Brexit did have an impact, but it’s absolutely the case that Brexit Whataboutism does Carney too much credit for mediocre economic handling. His claim, before the Referendum, in a shockingly political address for a central banker, was that a Leave vote would bring about a recession. It never came, in part because Carney got a rate cut through the relevant committee and the business community calmed down. It’s also incredibly apparent if you read any of the Brexit-era books - especially the Tim Shipman books, but also some of the memoirs of the players involved - or the contemporary press that nobody actually believed the downside outcomes were real, including many businesses. Yes, no-deal Brexit would have been a disaster. The idea that the risk of no-deal was significantly weighing down investment and growth is revisionism.

Carney’s record in both the UK and Canada is the same - overly cautious behaviour in the face of weak economies because of some down the line threat that never came. The Canadian tenure, post Global Financial Crisis, is less defensible because at least in the Brexit context he faced genuine political instability (three PMs in his tenure, to his one in Canada). How defensible his decisions were is arguable, but what isn’t particularly arguable is that he’s helmed two central banks and he’s never had robust economic growth in either country, in large part because of his decisions. And again, given the state of the Canadian commentary at the time of his exit, this isn’t revisionism.

Carney’s political instincts are also unacceptably bad. The decision to lay your credibility on the line as a central banker on an inherently political question is absurd. The fact that he allowed himself to go along with that is insanity, given the nature of the job and the nature of central bank independence. It’s especially insane to do so in a country that only made their central bank independent in the New Labour years, unlike Canada that had that fight in the early 60s.

The idea that Carney has another shift to play is something I’m sure he wants to believe. But sometimes it’s not on the players themselves to make that decision. Carney’s legacy in both Canada and England is of overwhelming caution choking the economy of needed liquidity and leaving them vulnerable. What Canadian Liberals need is a bold thinker willing to take tough decisions that have some risk. Giving the world’s most risk-averse central banker more power is a recipe for disaster.