It’s fair to say that Mark Carney’s 2021 book, Values: Building a Better World for All, was his early application to be prime minister. Values covers a wide swath of economic history and philosophy, and gives us some clues into what makes our new prime minister tick.
At the end of its 531 pages, Carney lays out a hopeful vision for Canada, albeit one lacking a sharper focus on details. We can only conclude he is a very competent centrist whose plans for Canada won’t depart much from the status quo. In the face of the second Trump administration, many will feel that’s enough, but one can’t help wanting more.
When I first read Values upon its release, I was a little disappointed. I was hoping for more of a memoir: an insider take on the 2008-09 financial crisis when Carney was governor of the Bank of Canada, or a behind-the-scenes look at the early days of COVID-19 pandemic, during which Carney was at the helm of the Bank of England. There are a few tidbits of memoir in the book, but for the most part, Values is a book about economics, history and philosophy from someone who’s been at the highest echelons of the public and private sectors.
So what are the big ideas in Values and what does this tell us about the type of leader he would be? Carney is a strong believer in markets but acknowledges they need to be regulated for there to be decent outcomes. In a contrast to the Milton Friedman-inspired free market views of his Conservative adversary, Pierre Poilievre, Carney comments, “unchecked market fundamentalism devours the social capital essential for the long-term dynamism of capitalism itself.“
Values comes in three distinct parts: a historical and philosophical contemplation of the evolution of modern economies and monetary systems; a review of three modern crises (financial crisis, COVID-19 and climate change); and, a proactive agenda spanning leadership and directions for a successful modern economy. Underpinning a successful modern economy, he cites seven essential values and beliefs: dynamism, resilience, sustainability, fairness, responsibility, solidarity and humility. We’ll circle back to these below.
As you might have guessed, Values is a play on the different social and economic meanings of the word value. The values we have as humans are embedded in our economic and political institutions, which should ultimately transcend the more pecuniary values of what we consume or purchase. Carney has an excellent discussion of how early economists perceived economic value as objective—largely linked to the labour that went into making something—as opposed to the subjective value of modern economics, where worth is in the eye of the beholder, as determined by the cold logic of the marketplace.
What values?
A key distinction made by a number of contemporary economists is between value creation and value extraction. The latter represents activities that skim off the rest of the economy, as forms of unearned income (also called economic rents). Value extraction initially referred to the unearned income accruing to landlords or the value of natural resources as gifts of nature. In a modern economy, unearned income is more often related to state-sanctioned monopolies, including patents and copyrights, and the gatekeeper functions played by banks, ticketing companies and social media platforms.
Unfortunately, Carney only peeks behind the curtain of value extraction and unearned income before moving on. Perhaps because a deeper dive might hit too close to home, including Carney’s early years as a banker with Goldman Sachs. If you want a more thorough critique of value extraction and rent seeking, a better starting point would be Marianna Mazzucato’s The Value of Everything or Joseph Stiglitz’s The Price of Inequality.
That’s a missed opportunity because a few chapters later, Carney opines on the corrosive impact of growing inequality. He cites evidence from the OECD and IMF to support a view that “relative equality is good for growth” and that “more equal societies are more resilient, … are more likely to invest for the many not the few” but fails to connect the dots back to the causes of inequality. Nonetheless, we are left with a lingering concern that the acquisitive values of a market society may undermine other core values like altruism, generosity, solidarity and civic spirit.
Three crises
The middle part of Values interrogates the three great crises of the past quarter-century: the 2008-09 financial crisis, the 2020-21 COVID-19 pandemic and the relentless slow burn of climate change. The book contains decent overviews of history and government responses but the analysis feels light when considering the ring-side seat Carney had.
On the financial crisis, Carney has more to say about an episode in 2007 than the full financial crisis itself that hit a year later. Carney was still at the Department of Finance when the Canadian market for asset-backed commercial paper (ABCP) was about to seize up. ABCP is a form of financial innovation known as securitization, which in this case means taking the stream of interest payments from corporate bonds (commercial paper) and repackaging them into assets that can be sold to pension funds and other investment funds.
Carney helped broker a deal on ABCP between London, New York and Canadian banks to get through the tight spot and avert a major crisis cascading through the financial markets. For the crisis we would have to wait a year, but those same fingerprints of financial innovation—the securitization of U.S. mortgages that bundled in the toxic assets of subprime mortgages—were all over the collapse and its spread to all corners of the world.
Carney became Bank of Canada governor in February 2008, but we don’t get any insight of how the Bank of Canada and Carney developed and implemented Canadian monetary policy when things fell apart that Fall. Instead, the narrative jumps to later efforts to elevate financial system stability through macroprudential regulation via the G20 and the Financial Stability Board—a club of elite central bankers and securities regulators. Thanks to these efforts, all is good, or so we’re told, but this is hardly reassuring as financial markets seem to leap from one bubble to the next.
Carney’s coverage of COVID-19 similarly lacks details about the unprecedented fiscal and monetary responses to the pandemic. The onset of economic shutdowns happened just as Carney was on his way out the door as Bank of England governor. It would have been fascinating reading to see how Carney and the Bank of England positioned themselves in the midst of such massive uncertainty. Instead, we get a diversion into the flaws of cost-benefit analysis and the misuse of indicators like statistical years of life that convert humans into dollars.
Carney speaks to rediscovered values like resilience and solidarity in the face of COVID-19, but it’s the impact of fiscal and monetary policies that matter most for economists. COVID-19 normalized quantitative easing, the purchase by central banks of financial assets held by chartered banks and institutional investors. This provided short-term liquidity in the form of increased reserves of base money held at the Bank of Canada and other central banks.
While this never comes up in the discussion in Values, it could be important in the election campaign to come. Conservative leader Pierre Poilievre has been peddling a Friedman-esque monetarist argument that the federal government irresponsibly printed money during COVID-19, which he says caused the 2022-23 inflation experience. In contrast to Poilievre’s allegations, this inflation episode is now widely believed to have been the result of COVID-induced supply shortages and the spike in energy prices from Russia’s invasion of Ukraine. All of which occurred after the publication of Carney’s book, so it will be interesting to watch former central banker Carney credibly destroy these arguments.
The final crisis, climate change, is one for which Carney was a vocal advocate as Bank of England governor, and in his time since then. Values takes a strong position in favour of carbon pricing and, later in the book, praises Canada’s approach. It’s an awkward reminder of how politics can undermine good policy, as Carney is now set to eliminate the consumer side of Canadian carbon pricing.
After leaving the Bank of England in 2020, Carney also strongly supported the creation of voluntary carbon offset markets, an interesting marriage of his personal concerns and his finance background. This effort never really got off the ground due to the tendency of offset markets to generate vast amounts of fraudulent activity. Carney’s recent firm, Brookfield Asset Management, was known for buying companies in carbon-intensive areas ostensibly to decarbonize them.
What’s next for Canada?
In the book’s final section, Carney speaks more to broader conceptions of values-based leadership by governments and corporations, with an emphasis on transparency and disclosure through things like ESG reporting. In a similar vein, he prods excessive executive compensation without going so far as to call for higher top marginal tax rates or other measures that would compress the distribution, like stronger unions.
At the end, Carney returns to his bid for prime minister and compiles his accumulated wisdom towards a plan for “How Canada can Build Value for All.” Up to this point, Canada is not the main actor in Carney’s narrative, as he takes a more global perspective. Indeed, his Canadian story lacks an understanding of our deeper orientation towards staples resource exports or the specific interprovincial or regional challenges the country now faces.
Alas, there’s not too much tangible policy detail in the Canadian plan, more of a restatement of those seven values, but in ways that deviate from common understandings. Most of his policy prescriptions seem to be in the vein of better regulation of markets to improve their functioning, along with a positive outlook on technology and promises of a “fourth industrial revolution.”
For example, solidarity is not about the role of unions in supporting workers to get better wages and working conditions. Instead, it’s more of a vague appeal for education and training so that workers have the skills needed to thrive. Similarly, fairness and responsibility are not about progressive taxation and ensuring a more just distribution of income, but an appeal for markets to work better through prudence and disclosure.
For Carney, the banker, resilience has more to do with identifying and preventing systemic risks to the financial system rather than ensuring our buildings and infrastructure can survive fires, droughts, floods and heat domes. Meanwhile, sustainability is about green investment opportunities shaped by a strategic direction set by governments through carbon pricing, regulation and financial disclosure. Ironically, Carney’s support for carbon pricing is among his strongest policy recommendations.
It’s not clear how Carney would come to grips with the massive inequalities in our society, the rapidly declining state of the climate, and the dark side of new technologies and their potential to displace mass amounts of workers. Nor does trade factor in, as the second Trump administration collapses the whole basis for Canadian trade with the United States, and the post-war global order, with the United States as hegemonic power, starting to crumble.
At the end of the day, Mark Carney’s values proposition is not enough to “build a better world for all.” You can take the boy out of Goldman Sachs but the imprint of Goldman Sachs lingers. Carney offers up a solid understanding of how we got here, and the complexities of building a modern mixed economy, but skirts over more fundamental economic challenges. As for Carney the politician, that chapter remains unwritten.
