Mark Carney will become the first man from overseas to head up the BOE in July of next year. This will be the first appointment of a non English man in its 318 year history. Why has the BOE taken this bold step and what will Mark Carney bring to the table that Mervyn King could not?
There is an uncanny resemblance to the situation within the BOE to that of the England football in the early 2000’s. After the departure of Kevin Keegan and the uninspiring leadership of Peter Taylor, the nation was desperate not only for success but for someone who could bring some credibility and pride back to a beleaguered national team. When it was decided that Sven-Goran Eriksson would be the first ever foreign England coach, it came with mixed emotions. He was not English therefore could not be patriotic. Maybe this is the whole point. Football like the world of finance and politics has changed, it is a business there is no room for emotion, fear or relying on past tactics. Eriksson approach the business of football in this manner, with little emotion total control and a new way of thinking. Game for game in results in his 6 years he went on to become the most successful England manager since Alf Ramsey over 40 years ago. So is this a timely coincidence in parallels and thinking, or are the BOE just taking a punt?
Sir Mervyn King, was quoted saying. ‘He represents a new generation of leadership for the Bank of England, and is an outstanding choice. Since Mark became Governor of the Bank of Canada, I have worked closely with him and admired his contributions to the world of central banking, in which he is widely respected.’ Of course King would say this, what else could he say. I think the language used in this short statement is key ‘new generation’ and ‘widely respected’. King is bringing the notion into play that the times and the world economy is changing. Someone who is regarded as an expert outside of the UK and used to dealing on a more global world stage is what is required now. A new type of governor of the BOE is required, one who is not constrained by the past generational thinking and rhetoric. He must base decisions on what is preferable to today’s economic horizon and that of tomorrow’s and for future generations. His mission is to be more in tune with how modern day fiscal policies are to be implemented and managed.
Can he do this? His credentials certainly say that he is as qualified as many of the other candidates out there. His strong stance during the start of the banking crisis and global slowdown and quick action of keeping interest rates low, certainly helped keep Canada outperforming its G7 peers. His decision to pump in much need fiscal stimulus was also a widely respected move. The main point here is not what he did but the speed and solid leadership he exhibited to control the situation. The question there in lies though, what tricks does Carney still have up his sleeves? With inflation consistently above target and the printing of money not helping this, what is he going to do that King could not?
Very much like Mario Draghi Mark Carney is a prospect. They both have Goldman Sachs on their respective CVs and everyone in the world knows that if you can cut it there you can, without breaking into song, make it anywhere. This means that he is used to finding creating and holding on to not just wealth but also profits. This is the world of finance that got us in to this economic mess, but realistically you have to know the beast in order to tame it. All this comes back to Carney being that ‘new generation’ a qualified and comfortable outsider that can tackle the complicated working of the ECB and maintain the UK’s standing in the global economy.
I see tough decisions ahead for both the BOE members and for Mark Carney but I believe that he will have the full support of the people who appointed him and the people who make up wider economy. I predict he will have a positive effect on how the BOE tackles inflation, interest rates and monetary easing and in the short term at least be seen as an educated gamble and break with tradition. The tried and tested Mervyn King is due to step aside in June 2013 and will leave the UK economy in ‘extra time’. Let us hope that Mark Carney can be the man to help us for once, win on penalties.