Relative equality is good for growth? Right you are, governor

http://www.theguardian.com/politics/2014/jul/13/relative-equality-good-growth-governor-mark-carney

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A friend of mind spotted Mark Carney and family in the cheap seats for Wolf Hall at London's Aldwych Theatre last week. He wondered whether the choice of seats was a gesture of sympathy with the majority of the population, whose real incomes, under Carney's employer George Osborne, are, shall we say, somewhat below the expensively recruited governor's. Or perhaps the play about rampaging Tudors is such a smash hit that those were the only seats available. Mind you, as my friend added with some emphasis, in tourist-filled London, even the cheap seats are quite expensive these days.

The governor has certainly been getting out and about. He was recently seen dining à deux with his predecessor Lord King, with the latter apparently doing most of the talking. Was he being given advice on the economy, or being scolded for his eccentric decision to replace cricket with rounders at the Bank of England's annual sports day?

However, I have come this week not to direct yet more criticism at Carney's confused pronouncements on interest rates, but to praise him. My friend's story prompted me to take another look at the text of Carney's speech on 27 May to the FT's Conference on Inclusive Capitalism. It is a stunningly good speech, and at times makes one wonder whether the governor is not to the left of the Labour party.

Consider: we have had the biggest financial crisis in living memory, and much of the Thatcher legacy – which New Labour cravenly adopted – is now discredited, yet a common criticism is that the Labour party is not taking advantage of this.

Carney is forthright. "Who does finance serve? Itself? The real economy? Society? And to whom is the financier responsible? Herself? His business? Their system?

"The answers start from recognising that financial capitalism is not an end in itself, but a means to promote investment, innovation, growth and prosperity. Banking is fundamentally about intermediation – connecting borrowers and savers in the real economy."

The governor went on: "In the runup to the crisis, banking became about banks, not businesses." Again: "The combination of unbridled faith in financial markets prior to the crisis and the recent demonstrations of corruption in some of these markets has eroded social capital … Rebuilding social capital is paramount." Why? "My core point is that, just as any revolution eats its children, unchecked market fundamentalism can devour the long-term dynamism of capitalism itself."

Carney notes that all the research suggests that "relative equality is good for growth." He yearns for that concept derided by the extreme right: an inclusive social contract. Moreover, to those of us who think that facing up to climate change actually offers great scope for technological progress and economic growth, he laments: "Environmental degradation remains unaddressed, a tragic embarrassment now seldom mentioned in either polite society or at the G20."

The irony is that the governor of the Bank of England can say such things; the pope, likewise, is widely praised for his emphasis on the need for social justice and an attack on extreme inequality. Yet when Ed Miliband criticises the excesses and bad practices of business, he is viciously attacked, by both business and, of course, the Conservative party.

There is another irony: the evidence suggests that the vast preponderance of business wishes the UK to remain within the European Union. Yet the party playing with fire and most likely to preside over "Brexit" is, yes, the Conservative party.

Optimists such as my old friend Lord Heseltine are hoping that, if re-elected, David Cameron will be able to resist the tide of Euroscepticism. However, he has given so many sops to the Cerberus of Ukip and the Tory right that one has one's doubts.

But back to business. The Labour party has moved a long way since prime minister Harold Wilson privately gave a toast to a new high in the FT share index but told his guest, Financial Times editor Gordon (later Sir Gordon) Newton, to keep quiet because the story would not go down well with the comrades.

Labour is not anti-business. One only has to look at the good work being done by shadow ministers such as Lord Adonis, whose new report – Mending The Fractured Economy – could hardly be more pro-business, with its recommendations for improving local enterprise partnerships.

Adonis comes up with no fewer than 23 constructive recommendations. I cannot mention them all here but a typical example, given the disturbing state of our trade balance, is the call for much greater support for exporters. In this sphere, as in government support for research and development – the seed corn of future growth – we are way behind the OECD average.

Indeed, although it pays lip service to "rebalancing" the economy, I think this government has been woefully mistaken in having placed so much emphasis on reducing the budget deficit during the depression, and not enough on nurturing the manufacturing sector and dealing with the trade deficit.

To judge from some of his public statements, the present governor of the Bank of England does not entirely disagree.