Magazine article Newsweek

Canada's Mark Carney Might Be Britain's Only Economic Hope; the North American Running Britain's Central Bank Is Fighting to Keep the Country's Economy Together after the Brexit Vote

Magazine article Newsweek

Canada's Mark Carney Might Be Britain's Only Economic Hope; the North American Running Britain's Central Bank Is Fighting to Keep the Country's Economy Together after the Brexit Vote

Article excerpt

Byline: Mirren Gidda

Updated | On July 4, 11 days after the U.K. voted to leave the European Union, New York-based ratings agency Standard & Poor's issued a warning. Because of Brexit, it said, "the U.K. will barely escape a full-fledged recession," and the decision to leave will drag down the U.K.'s predicted growth in 2017 by 1.2 percent of gross domestic product (GDP). The situation would get worse, it added, should the Bank of England not succeed "in keeping turmoil in financial markets in check."

Which is ratings-agency-speak for: "Mark Carney, for the love of God, save us all!"

A day later, Carney, the governor of the Bank of England, Britain's central bank, held a press conference. Flanked by three of his employees, the Canadian financier did his best to prevent the decision made by 51.9 percent of the British electorate from doing further economic damage. "We have a clear plan, we're rapidly putting its main elements in place, and it's working," he said, speaking to the deeply worried nation and financial world in the manner of an American president.

Carney's impersonation of a financial superhero impressed David Blanchflower, an economics professor at Dartmouth College, who previously worked for the Bank of England. He tweeted: "Most impressed by Mark Carney's performance post Brexit vote. [He's] been on top of things, an adult in [the] room while politicians play children's games."

Blanchflower's faith in Carney as the only truth-speaking, responsible public official left in Britain is shared by many economists. The U.K.'s ruling Conservative Party is in the midst of changing its leaders. Home Secretary Theresa May has replaced David Cameron who resigned over Brexit. The main opposition party, Labour, is facing a challenge to its leader, Jeremy Corbyn. The leader of the United Kingdom Independence Party, Nigel Farage, who was a staunch campaigner for Brexit, has also resigned. Carney, analysts say, seems to be the only person with real power in Britain focusing on preventing economic implosion rather than bickering over career opportunities.

It is a role Carney never wanted. He did pretty much all he could, without becoming overtly political, to prevent Brexit. On May 12, more than a month before the U.K.'s EU referendum, Carney warned that a Brexit "could possibly include a technical recession." (A technical recession is defined as two consecutive quarters of negative growth.) And for that--a simple statement of fact and a duty-bound warning--Carney made himself some powerful enemies.

Politicians who backed the Leave campaign accused him of buying into what they called "Project Fear," their term for the Remain campaign's warnings of the effect a Brexit could have. Andrea Leadsom, who until recently was one of two candidates running for leader of the Conservative Party--and thus the office of prime minister--said of Carney's comment, "He has encouraged financial instability, and I think that absolutely damages the reputation of the bank." Another Conservative lawmaker, Jacob Rees-Mogg, called on Carney to resign.

Other Leave campaigners accused Carney of overstepping his role by commenting on a political matter; the Bank of England's governor is supposed to remain politically neutral at all times, even though he or she is appointed by the government. Carney responded that he wasn't telling people how to vote but alerting them to the potential dangers of leaving, which is within the Bank of England's remit. The bank's role, Carney said, was to "identify risks, not to cross your fingers and hope risks would go away."

The British voters weren't persuaded by Carney's warning. And since the vote on June 23, some Leave campaigners have said his warning is responsible for the pound's decline in value--a charge analysts refute. "I think it's an outrage that people are saying that Carney has talked down the economy," says Blanchflower. …

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