Mark Carney and Whose Army?

By Neil Wilson

The Governor of the Bank of England, Mark Carney makes about £800,000 a year, of which £250,000 is a top-up to help with the rent, has the right to change interest rates without accountability and cannot be removed from his job. What could go wrong?

One of Gordon Brown’s first moves as the incoming Chancellor of the Exchequer in 1997, was to declare the “independence” of the Bank of England. In handing control of UK interest rates to a set of unelected officials, Brown was attempting to demonstrate “fiscal responsibility”. It was a tacit admission of defeat to the neo-liberal and conservative critique that Labour couldn’t be trusted with the economy. Influenced by Clinton-era spin and hyperbole, Brown remade the Bank of England in US Treasury’s image, then under the leadership of Reagan-appointee Alan Greenspan.

Greenspan, sitting like Zeus on Mount Olympus, dispensing showers of gold to the faithful, ushered in the era of god-economists. Greenspan’s successor was frequently referred to as “Obi-Wan Bernanke”.

Prior to 1997, the Governor of Bank of England was relatively anonymous civil servant, answerable to the Chancellor of the Exchequer, thereby Parliament, thereby the People. Brown broke the democratic tradition for a short-term political fix.

Top-level civil servants can certainly expect to be well-paid, with some earning around £250,000 per year, although board directors of FTSE 100 companies can easily command salary packages in seven figures. However, a celebrity civil-servant requires a celebrity remuneration package. The Bank of England accounts indicate that Carney’s package is around £800,000, of which around £250,000 is a top-up to help with the rent. Carney has previously worked for Goldman Sachs, which would put him closer to the seven-figure-celebrity pay bracket than a time-served Sir Humphrey.

There are many reasons why this is a problem, but first let’s consider the role of Governor from Tony Benn’s Five Questions to the powerful:
1. What power have you got?
2. Where did you get it from?
3. In whose interests do you exercise it?
4. To whom are you accountable?
5. How can we get rid of you?

With an “independent” Bank of England, answers appear to be:
1. Life and Death over the populace, particularly the poor, by restricting government’s ability to deploy resources as needed,
2. A shadowy collection of like-minded financial services interest groups,
3. See 2,
4. Probably no-one, but see 2.
5. You can’t.

By swallowing the “sound finance” narrative and allowing the City to appoint one of its own, the Government of the United Kingdom has essentially demolished a fundamental underpinning of democracy.

According to “sound finance”, the Central Bank is the source of money injection into the economy, using the lever of interest rates to adjust quantities of personal debt. As we have seen this leads to unsustainable debt bubbles. Personal debt in the UK is now near the highest levels ever seen, and this excludes Student Loan debt, which is treated as a deferred tax by the government and an actual debt by everyone else. This means personal debt levels are now starting to have real consequences for British lifestyles. Graduate debt is included in mortgage applications, adding to the unaffordability of housing, creating a generation mired in debt and housing instability, who in turn will be less likely to start families, exacerbating the aging population.

“Don’t worry!” say the Bank of England cheerfully, “Interest rates are still low!” Of course, they would say that wouldn’t they? They need spiraling private borrowing to transfuse cash into an economy bleeding from deflationary spending cuts.

By swallowing the “sound finance” narrative and allowing the City to appoint one of its own, the Government of the United Kingdom has essentially demolished a fundamental underpinning of democracy.

Carney and his cardinals believe government spending is constrained. Not by resources, which of course is true, but by actual money. You know that extra £1bn that magicked its way to Northern Ireland? It can’t exist in the Carney universe.

So we have a Governor of the Bank of England who quite literally maintains something that even the Conservative government have proved to be false, has the right to change interest rates without any accountability to the people, and cannot be removed from his job.

The Scottish parliament is constrained as it does not control its own Scottish currency. Many there would like Scotland to have the monetary freedom of the Westminster Parliament. In reality, the “sound finance” lobby would like to reduce Westminster to a provincial parliament like Holyrood, with global financial services dictating the terms and supply of Pounds, and the Governor of the Bank of England choosing the colour of the plastic notes.

Central Bank independence is generally justified with impressive-sounding data on inflation. Silly politicians can’t help tinkering with interest rates, you see. Best leave it to the professionals.

The golden era of low inflation we have enjoyed since the late 1990s is a symptom of insufficient negotiating power among workers (who fear unemployment and cannot bargain for better wages). This, in turn, has been driven by a steady, neoliberal push for an ever smaller public sector. It’s like lowering your blood pressure by slashing your wrists. The influence of Central Banks and the theatrical showmen at their helm is, at best, homeopathic. At worst, toxic.