Mark Carney Offends The Right People

[Update at end of post]

The Bank Of England (BoE), in case anyone had not noticed, has a new Governor, Canadian Mark Carney, replacing Merv the Swerve and ushering in a new mood, as demonstrated by yesterday’s “new guidance” on where interest rates will be for the next three years. Here, he asserted that, subject to a number of caveats, rates would remain low while the unemployment rate remained above 7%.

While many businesses and pundits broadly welcomed Carney’s statement, and Sterling rose as the day went on, some took the idea of taking unemployment rates into consideration when making judgments on interest rates as a combination of personal affront and forthright heresy. And, to no surprise at all, all those so doing were out there on the right of the political spectrum.

The Institute of Economic Affairs (IEA) was reduced to apoplexy: “This is the most dangerous development in UK monetary policy since the late 1980s” they spluttered, before selling the pass. “The level of unemployment is mainly determined by a range of factors such a labour market regulation, the benefits system, tax rates and so on” they explained. The benefits system? Wait, what?

So the IEA requires the fallacious idea that benefits are a lifestyle choice, and that they are preventing people from becoming employed, to prove true in order for their judgment to be credible. The Adam Smith Institute (ASI), that museum of outmoded economic thought that has fraudulently appropriated the name of the founder of economics, fared little better.

“Mark Carney had the leeway to make real radical change here, but he’s bottled in with baby steps” was their assessment. And their solution? “What we really need is a truly rule-based system that takes discretion away from nine 'wise men' and uses market forecasts to create real stability”. Ah, memories: I too remember that machine at the Treasury with the coloured water sloshing around.

Former stalwart of the so-called Taxpayers’ Alliance Mark Wallace does little better at ConHome, borrowing the IEA drivel about the benefits system, before droning on about “rampant inflation”, which we haven’t had for over 30 years – thank goodness (the “Lawson boom” brought inflation, but “rampant”? Away with you). Fortunately, others have a more nuanced and objective analysis.

As the Beeb’s Stephanie Flanders put it, “life is complicated right now for Britain’s central bank”. Carney has brought little change, but has given us more engagement and openness. And, as for the 7% unemployment figure that has so offended the right, Richard Murphy has pointed out that this would still leave over two million out of work. Keynes, many years ago, had much to say about numbers like those.

But it’s good to know that the right don’t care about such things. As always.

[UPDATE 9 August 1815 hours: right on cue, Allister Heath, nominally the editor of freesheet City AM, but as any fule kno a stooge for the so-called Taxpayers' Alliance, has confirmed that Mark Carney is on the right track by coming out in forthright opposition.

And it is not long before Heath sells the pass in no style at all, as he asserts "Unemployment is not a great measure of spare capacity". You read that right: when the economy has well north of two and a half million people effectively twiddling their thumbs while searching for the next job, they are not really spare capacity.

This clown might just have brought Milton Friedman and J K Galbraith into agreement]