Buried under the frenzy around the Leveson report was the British government’s coup of attracting Mark Carney, governor of the Canadian Central Bank, to London. Apparently ruled out of the running, much to the chagrin of those who felt he was the best man for the job, Carney has now been appointed as governor of the Bank of England and will take up the job next summer. For those who view these appointments as purely about expertise and experience, this is a great victory. Gone it would seem are the mercantilist days where nationality, wealth and government policy were so closely aligned. The cosmopolitan financial press, from the Financial Times to The Economist, are satisfied. Britain, it seems, is a pioneer in these international recruitments for national institutions: think of the English football team. That Carey was a Canadian certainly helped make him acceptable to the British establishment. He’s sort of one of us, after all, runs the sentiment. But the principle still stands that positions such as these are all about competence and expertise. There is no politics or partisanship here and the appointment of Carney, we are told, is proof of that.
It is also proof of a number of other things. One is that there is emerging a cadre of elite central bankers who move relatively seamlessly from one appointment to another. National boundaries seem less restrictive than in the past. This holds true to some degree at the global level, where competition for posts such as head of the IMF or the World Bank has become more intense. The old Bretton Woods division of the spoils between Europe and the United States is coming under serious pressure and may not survive the next round of appointments. And nationally, central banks are opening up with Britain leading the way. Curiously, the European Central Bank in this regard is behind the times: its appointments are rigidly based upon the principle of achieving balance between nationalities. The unfortunate Lorenzo Bini Smaghi was edged out of the ECB executive board because it wouldn’t do to have two Italians in there and no Frenchman. Draghi became director, Smaghi was out, and Benoit Coeuré was in. This seems rather old hat and overly political compared to the forward looking Bank of England. Whether other central banks follow Threadneedle Street’s example is unclear but the principle has been established and there is no short supply of expert central bankers.
It is also proof that the way we understand banking, finance and monetary policy today is entirely free of political principle. The struggle between banking and financial interests and those of elected representatives is a long-standing and epic struggle. There is nothing new there. But central banks have often been seen as exceptions. They are, after all, lenders of last resort and in that respect are eminently political institutions. Those critical of the ECB in the current crisis have often suggested that it’s role should become more, not less, political in so far as it needs to act in order to save the Eurozone from collapse. Yet the implication of Carney’s arrival is that the tie between central banks and national politics should be cut. This is a mistake. Carney may be Canadian but the Bank of England remains firmly part of the functioning and survival of the British economy. And the Bank of England should still be understood as an agent of national capital, in spite of who is running it.
Carney’s appointment also chimes with a more general feeling that politics is seeping out of macro-economic policy as a whole. Illustrative in this regard is the debate underway at the moment around who might replace Tim Geithner as US Treasury Secretary. One name that has been floated around, and who the FT considers a realistic outside contender, is Larry Fink. As head of the biggest asset management group in the world (BlackRock manages around 3.7 trillion US dollars of assets), Fink is a heavy-weight figure, as important as those running the big Wall Street banks. However, his entire background is in finance. He certainly has views about how the US economy should be run but to appoint Fink would be to give the job to an expert. And this is not a job as central banker but as Treasury Secretary, an ostensibly political appointment. Of course, experts have long been appointment to this position. There is even talk of Geithner stepping down and joining BlackRock and Fink moving in to take his place. Were this to happen, it would illustrate how firmly financiers dominate economic policymaking and how expertise in finance has become the baseline for political appointments within the US Treasury.
As we’ve argued before on this blog, expertise does matter in politics. But the overwhelming tendency today is to view macro-economic policy as a purely technical realm, rather than as one where technical questions co-exist alongside fundamental differences of political principle and alongside important moral questions. Such a tendency has the effect of shielding economic policy from public criticism and gives to public financial institutions like central banks a veneer of political and social neutrality. In fact, no amount of expert knowledge can obviate the need to make political choices. The most honest experts will say that various scenarios are possible and that the choices depend upon what outcomes we want. It is these outcomes that we should be debating, not which expert can magically solve our ethical and political dilemmas about what sort of society we want to live in.