Mark Carney is a former governor of the Bank of England (2013- 2020). So he is well aware of values in economics calculated in money. This book also shows value, as calculated by bankers and in company reports, is deeply connected with social value, what Adam Smith called “moral sentiments”.
The book is divided into three parts:
The Rise of the Market society
This is about the development of economic theory from the medieval period (theories of just price), mercantilism (and the grab for gold), global trade, the gold standard, cryptocurrencies. But this is not a boring history tale, as he spices it with sharp comment about what happens when economics erode or devalue the social good.
Three Crises of Value
These are the Global Financial Crisis of 2008; the Covid pandemic and the Climate Crisis. I read this part of the book with respectful interest as here is a writer who was at the centre of affairs, who had to make decisions in the face of crises that affect millions. As a banker, he explains with clarity how wrong the banks were to depend on unexamined derivatives that ballooned phoney finance until it all went pop, and had to be rescued by central banks, through decision-making he was part of. The Covid pandemic made us realize belatedly the importance of preparedness and resilience. The Climate Crisis is causing us to develop measurements other than financial return for investment, measurement of carbon-neutral, of bio-diversity gain and so on.
The book was published in 2021, so I was surprised that the final chapter does in fact contain a few remarks about the economic shock of Russia’s invasion of Ukraine, presumably added in recent months before the paperback edition was published.
Reclaiming our Values
This has 4 chapters, the first about leadership, then about purposeful companies, then investing for value and finally how countries can build value.
The conclusions are about humility.
My chief complaint about this book is against the publisher and the lay-out choices. There are some intriguing graphs, graphs being a form of expression much favoured by economists. But regrettably they have mostly been squashed into half a page, all in black and white, with miniscule labelling. Please, William Collins, in a book of economics, the graphs deserve better treatment! I wonder whether they look any better in digital reading on tablet or phone.
However, the use of the index for sourcing is thorough and well edited. This is necessary because Carney admits (p331)
“My nature is to take a deep dive into analysis to understand an issue. This requires reading widely, speaking to lots of different people and then attempting to synthesize conflicting points of view or data”.
His range of sources is huge, and, of course, he has met and interacted with the main economic leaders of this era.
Socially Responsible Investing
The pages I most enjoyed concern how to judge the value of a company by ESG (Environment Impact, Social Contribution and Governance). This, he writes (P364), grew out of SRI (Socially Responsible Investing) of the 1960s. Early SRI models used negative value judgements to screen companies for involvement in tobacco or apartheid South Africa. Indeed that was so, and I was an early activist in this, phoning the Church Commissioners from a coin-box telephone in a Student Union building to complain about investments in South Africa, and arrange an interview.
Now almost 60 years later it is heartening to see, from the pages of the Ethical Consumer, how much more sophisticated the measurements of value in various economic sectors has become.
A problem with such measures is that the scales do not necessarily correlate: the firm that is good on carbon-neutral may be poor on treatment of workers, or on tax transparency. Very few come out top on all criteria. However, Carney asserts that assiduous tracking of investment records through the years does reveal some just rewards. The companies that are most attentive to ESG measures turn out also to give higher returns in the long run.
Increase in sustainably managed assets
There has actually been a huge increase in ESG sustainably managed assets, now consisting of about half the assets in Europe and one third in the US. One third of the largest asset owners are now signed up to the UN principles for responsible investment (PRI).
What I like about the final chapter, which has comment and recommendations for national economic choices, is that it is the advice of an expert who is essentially above party politics. I did not notice a single mention of UK political parties in this chapter. “Strong institutions are the foundations of opportunity for all”. He writes with the insight of someone who had to make decisions about strengthening the banking sector with stress tests. As a central banker, he was at the hub of where market exchange happens, and monetary decisions are made, but also in consultation with governments who have to make decisions about how to share the fiscus.
AI requires new policies
This decision-making is now taking place in the 4th Economic revolution, when AI is now beginning to change the job-market and global trade. New policies are necessary to give everyone an opportunity to thrive. “the test should be that everyone sees their real learning and prospects grow over their lifetimes”.
He rejects financial valuation of the market that narrows our values. Instead this book argues that we must create an eco-system in which society’s values broaden the market’s conception of value. Pay heed, investors and company boards, and reckon up your ESG value. Read this book for the arguments why.