Bank of England governor, IMF chief warn against unbridled capitalism
29 May 2014
The governor of the Bank of England, Mark Carney, has warned that society is becoming more unequal because of ''amplifying the rewards of the superstar''; and pledged himself to help build a ''more trustworthy'' form of capitalism.
Speaking at a conference on "inclusive capitalism" alongside International Monetary Fund (IMF) chief Christine Lagarde and former US president Bill Clinton in London – not to mention Prince Charles, Carney said that society's basic social contracts are a casualty of the financial crisis.
Speaking on Tuesday at an 'inclusive capitalism' conference organised by Lynn Forester de Rothschild, he said there is still much to be done in reforming the financial system, from how bankers are remunerated to making sure institutions are no longer "too big to fail".
Carney, of Canadian origin, warned of ''disturbing evidence'' of declining social mobility in the US as well as widening inequalities ''virtually without exception'' at a time of soaring executive pay.
''Returns in a globalised world are amplifying the rewards of the superstar and, though few of them would be inclined to admit it, the lucky. Now is the time to be famous or fortunate,'' he said.
The chief of the UK's central bank stressed that the capitalist system could not be taken ''for granted''.
Carney's fellow speaker, IMF managing director Christine Lagarde, also attacked the unreformed bonus culture of the financial world at the conference.
She called for the G20 to push ahead with pay reforms ''because the behaviour of the financial sector has not changed fundamentally in a number of dimensions since the financial crisis'' and accused the industry of resisting reforms.
Against the backdrop of scandals such as Libor fixing, foreign-exchange rigging and money-laundering, Ms Lagarde said, ''While some changes in behaviour are taking place, these are not deep or broad enough. The industry still prizes short-term profit over long-term prudence, today's bonus over tomorrow's relationship.''
Lagarde attacked banks for resisting efforts to reform the system to allow the biggest financial institutions to fail safely. ''The bad news is that progress is still too slow, and the finish line is still too far off,'' she said.
''Some of this arises from the sheer complexity of the task at hand. Yet, we must acknowledge that it also stems from fierce industry push-back, and from the fatigue that is bound to set in at this point in a long race.''
She argued that rising income inequality was casting a ''dark shadow'' across the global economy. She called on capitalism to become more inclusive by making income tax ''more progressive without being excessive'', making greater use of property taxes and expanding access to education and health.