Business

Carney warns about popular disillusion with capitalism

Mark Carney Image copyright Reuters

Bank of England Governor Mark Carney has warned that people will reject free and open markets unless something is done to help those left behind by the financial crisis and globalisation.

In a speech, he said: "Globalisation is associated with low wages, insecure employment, stateless corporations and striking inequalities."

There are "staggering wealth inequalities" in many advanced economies, he added.

Mr Carney was speaking in Liverpool.

He told his audience that politicians and central bankers must act to ensure people do not lose faith in the current system.

"Turning our backs on open markets would be a tragedy, but it is a possibility," he said.

"It can only be averted by confronting the underlying reasons for this risk upfront."

Ahmed: Carney says get real, there are losers from free trade

Mr Carney, giving the Roscoe Lecture at Liverpool John Moores University, spoke of the need for wealth distribution and putting individuals back in control.

He cited Prime Minister Theresa May's criticism of "stateless corporations" who paid little tax and had little responsibility to local communities.

The governor said: "Redistribution and fairness also mean turning back the tide of stateless corporations."

"As the prime minister recently stressed, companies must be rooted and pay tax somewhere.

"Businesses operating across borders have responsibilities," he added.

'Challenges to prosperity'

Image copyright Getty Images

The lecture is only the second major public speech Mr Carney has given since the June Brexit referendum.

Since that vote, the governor has had to defend himself against criticism that he had made explicitly pro-Remain comments, and also against suggestions that the prime minister had been unhappy with the Bank's monetary policy because savers had lost out.

However, although Mr Carney acknowledged in his speech that there were losers from the policy of low interest rates, he said: "The thrifty saver and the rich asset holder are often one and the same."

"Just 2% of households have deposit holdings in excess of £5,000, [they have] few other financial assets, and don't own a home.

"So the vast majority of savers who might have lost some interest income from lower policy rates have stood to gain from increases in asset prices, particularly the recovery in house prices," he added.

The challenges to greater prosperity, he said, were far wider.

Mr Carney listed three priorities:

  • "Economists must clearly acknowledge the challenges we face, including the realities of uneven gains from trade and technology"
  • "We must grow our economy by rebalancing the mix of monetary policy, fiscal policy and structural reforms"
  • "We need to move towards more inclusive growth where everyone has a stake in globalisation."
Image copyright AP
Image caption Andy Haldane, chief economist at the Bank of England

Last week, the bank's chief economist, Andy Haldane, struck a similar note when he warned about Britain's widening inequality gap.

He was concerned not just with the gap between rich and poor, but also geographically - between north and south, east and west.

Mr Haldane said in a speech: "I think [the issue of regional inequality] is right up there as among the most important issues that we face today as a country."

"What's more, the variations are among the widest in Europe."

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