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Can Mark Carney be ‘The Sustainable Governor’ of the Bank of England?

by Alex Rubin Can Mark Carney be ‘The Sustainable Governor’ of the Bank of England? When Mark Carney was announced by George Osborne as successor to Sir Mervyn King, commentators and the City alike were both surprised. On 4 July 2013, stock markets and investors were also surprised when the same man issued a clear statement that the Bank of England would maintain low interest rates for a sustained period of time. So can Mark Carney surprise the British public and become the ‘The Sustainable Governor’? Yes He Can During Carney’s reign as Governor at the Bank of Canada he made a number of speeches and statements which demonstrated not only his interest in sustainability, but his advocacy for it. For example, in 2012 he urged Canadian businesses to embrace the country’s natural resources by developing it ‘quickly, efficiently – and sustainably’.<1>Again, but in reference to global financial reform, he stated that it is a necessity for financial markets to undergo reform in order to evolve and create sustainable employment for Canada’s future.<2> Carney’s work at the Bank of Canada from 2003 onwards has also been guided by this long term view of sustainability. His work has often been described as guiding Canada’s economy towards a long term ‘sustainable equilibrium’ in the face of the 2009 economic crisis.<3> This has consisted of stimulating internal demand through intervening in the housing market and encouraging household borrowing while maintaining high employment. In turn this has led to focusing on inward investment and the country’s exports. Carney has described these actions as: “a difficult rebalancing, but what we’re seeing without question is a very constructive evolution of Canadians’ attitude towards debt and towards the housing market and it is moving towards a much more sustainable equilibrium.”<4> No He Can’t While Carney’s past suggests he could be the man favouring long term sustainability, putting those words into actions may pose as a stiffer test to the new Governor of the Bank of the England. As Sir Mervyn King’s experience has shown, as in his last Monetary Policy Committee (MPC) where he was outvoted 6-3 on further quantitative easing, the governor doesn’t always get his own way.<5> Carney’s move to the Bank of England has also been described by commentators as ‘going from the frying pan into the fire’.<6> Compared to his role at the Bank of Canada where he was able to set interest rates, Carney no longer has the power to do so with just a single vote at the Bank of England. This will mean he will have to be a high persuasive figure within the MPC. Economists have also pointed out that the Bank of England has fulfilled its mandate in relation to providing vital support to the UK economy. This suggests that Carney’s weaponry may not be particularly powerful in the face of the UK witnessing its weakest recovery.<7> Yes He Can or No He Can’t? Mark Carney will face a number of hurdles in striving for a long term sustainable economy for the UK. Considerable internal pressures but also external factors will place considerable weight on Carney’s shoulders and his strategy. Whether Carney can rebalance the UK economy remains to be seen but he certainly has experience, acumen and entrepreneurship on his side.

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