Mark Carney: value or price?

Mark Carney has a book out. It is called Value(s): Building A Better World For All.  Canadian born Carney was formerly the governor of the Bank of England – the best paid governor ever at £680,000 a year plus £250,000 housing expenses.  Carney recently commented that “You don’t get rich in public service.”!

Before that Carney was governor of the Bank of Canada, becoming the youngest central bank governor in the G20 nations.  And before that he was 13 years at, guess where, Goldman Sachs, where he played a prominent role in advising the black majority government of South Africa on issuing international bonds and he was active for the company during the Russian debt crisis of 1998.  Goldman Sachs made billions from these activities as the South African and Russian economies dived.  And Carney made a fortune at Goldman Sachs. When asked recently whether he considered working for this investment bank ‘built a better world for all’, given its reputation as the ‘vampire squid of finance’, he responded “It’s an interesting question. When I worked for Goldman Sachs it wasn’t the most toxic brand in global finance, it was the best brand in world finance.” So he left just in time, it seems.

Recently he was asked what he thought was his greatest achievement at the Bank of England.  His answer: “A more inclusive decision-making process with a more diverse staff. So more diverse bankers – a great achievement.  No wonder Carney has had many accolades bestowed on him by the great and good: he was named one of the 100 most influential people in the world by Time magazine in 2010, the world’s most trusted Canadian in 2011, and hailed as Britain’s most influential Catholic (by The Tablet) in 2015.  And he has hinted that he might want to become the leader of the governing Canadian Liberal Party if and when Trudeau steps down.

After finishing at the BoE, he took a job with Brookfield Asset Management to advise them on environmental investment strategy and he is now to advise the UN and Conservative Johnson government on ‘financial strategy’ at the upcoming international UN Climate Change conference, Cop26, taking place in Glasgow, Scotland this November.

Now while he carries out his duties on the ‘environment’, he has written a book that outlines his philosophy on the nature of markets.  As he tells us, modestly, that “I led global reforms to fix the faultlines that caused the financial crisis, worked to heal the malignant culture at the heart of financial capitalism and began to address both the fundamental challenges of the fourth industrial revolution and the existential risks from climate change.”  But in doing these ground-breaking tasks to his usual brilliance he has become somewhat disillusioned with ‘markets’: “I felt the collapse in public trust in elites, globalisation and technology. And I became convinced that these challenges reflect a common crisis in values and that radical changes are required to build an economy that works for all.”

It’s not the first time that Carney has criticised ‘market’ economies and mainstream economics.  He did so back in 2016 in a lecture in Liverpool.   And again, in his book, he notes that, in this world of market economies, global poverty and inequality remains and most important for him, the environment is being destroyed. In his book, Carney asks why many of nature’s resources are not valued unless they can be priced.  He gives the example of the Amazon rainforest only appearing as valuable when it has become a cattle farm. So price was not always a good measure of value. During the COVID crisis, Carney notes that it is the relatively low paid jobs that are high value, but they are not priced as such.

The problem, for Carney is that with markets We are living Oscar Wilde’s aphorism – knowing the price of everything but the value of nothing – at incalculable costs to our society.  You see once we get beyond buying and selling goods and get into delivering services that people need, ‘the market’ falls short. As we move from a market economy to a market society, both value and values change. “Increasingly, the value of something, of some act or of someone is equated with their monetary value, a monetary value that is determined by the market. The logic of buying and selling no longer applies only to material goods, but increasingly governs the whole of life from the allocation of healthcare to education, public safety and environmental protection.”

Markets commodify people’s needs and that’s the problem because “Commodification, putting a good up for sale, can corrode the value of what is being priced. As the political philosopher Michael Sandel argues, “When we decide that certain goods and services can be bought and sold, we decide, at least implicitly, that it is appropriate to treat them as commodities, as instruments of profit and use.”

Turning away from the free-market libertarian philosophy of Milton Friedman and Ayn Rand, Carney appeals to moral philosophy of his hero, Adam Smith. “Putting a price on every human activity erodes certain moral and civic goods. It is a moral question how far we should take mutually advantageous exchanges for efficiency gains. Should sex be up for sale? Should there be a market in the right to have children? Why not auction the right to opt out of military service?”

You see, the apparently great proponent of ‘the invisible hand’ of free markets, Adam Smith was no such thing in all circumstances.  Smith opposed monopolies and corruption in favour of free trade, but he also tempered that with a moral counterweight in support of the weak and exploited.  Carney quotes Smith from his less famous book, The Theory of Moral Sentiments, where Smith said: “However selfish man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.”

Thus Carney reaches a dilemma: price or value?; or to use Marxist terms: exchange value or use value?; profit or social need?  Economics should be about increasing social well-being, but it is obsessed with market pricing instead.  “This underscores the moral error of many mainstream economists, which is to treat civic and social virtues as scarce commodities, despite there being extensive evidence that public-spiritedness increases with its practice.”  Carney’s answer is to restore ‘a balance’ between markets and morals; between price and value.

Carney is not the first of the great and good of the financial elite to ‘moralise’ about the failures of capitalism, once they have retired from carrying out its duties in a high priced but low value series of jobs.  Another Christian and fellow central banker, Mario Draghi, now recently appointed (not elected) prime minister of Italy, and before that head of the European Central bank and, guess what, yet another senior employee of Goldman Sachs, has also professed a moral philosophy that is supposed to direct his good intentions in carrying out the strategies of finance capital.

Back in the middle of Greek debt crisis that saw the Greek people lose jobs and livelihoods in order to pay back debts to French and German banks, Draghi commented: “the crisis has dented people’s confidence in the capacity of markets to generate prosperity for all. It has strained Europe’s social model. Alongside the accumulation of staggering wealth by some, there is widespread economic hardship. Entire countries have been suffering from the consequences of misguided past actions – but also from market forces that are sometimes beyond their control.”  Like Carney now, Draghi then asked the question of himself: “what is the right framework for reconciling free enterprise and individual profit motives with concerns for the common good and solidarity with the weak?” And he answered just as Carney does now: “Ultimately, we must be guided by a higher moral standard and a profound belief in creating an economic order that serves every person.”

Draghi went on to explain that: “I find myself in the company of Marx. Not Karl, but Reinhard. Cardinal Reinhard Marx has rightly insisted that “the economy is not an end in itself, but is in the service of all mankind.”  Cardinal Reinhart Marx is the Archbishop of Munich who wrote a book at the depth of the Great Recession entitled “Das Kapital: A Plea for Man”, named after Karl’s work, but designed to reject Karl’s ideas.  Reinhart Marx wants a market economy that is “kinder to the weak and downtrodden” instead of “heaping even more rewards on those who behave immorally.” That should appeal to Carney as well.

It seems that the appeal to ‘moral values’ over ‘market forces’ was also emitted by the former head of Goldman Sachs, Lloyd Blankfein, when Carney was there.  Just after the end of the global financial crash, in 2010, Blankfein was interviewed and asked what ‘moral’ responsibility did Goldman Sachs and other investment banks have for the financial collapse that triggered the worst global economic slump (until COVID) since WW2.  He replied that he thought his job as a prominent banker was to do “God’s work”.

Indeed, Blankfein continued his moral crusade in heading the bank during the multi-billion-dollar 1MDB state fund scandal, where former Malaysian prime minister Najib Razak and his family corruptly siphoned off billions – it seems with the connivance of Goldman Sachs. God’s work in this case appears to be having Goldmans arranging bond issues worth $6.5 billion for 1MDB, with large amounts of state funds ($2.7bn) misappropriated in the process.

What is Carney’s practical solution to the contradiction between price and value created by the market?  It is the classic mainstream one of trying to account for social needs in pricing by pressing and persuading capitalist enterprises to do things ethically and for ‘a better world for all’.  In working for his latest asset management company he aims to get investors to make ethical and ‘green ‘ investments.

But just as he delivered his Reith lecture on hiss book on ‘values’, he had to retract an earlier claim that the $600bn Brookfield Asset Management portfolio he was working on was carbon neutral. He based his claim on the fact that Brookfield has a large renewable energy portfolio and “all the avoided emissions that come with that”. The claim was criticized as accounting tricks as avoided emissions do not counteract the emissions from investments in coal and other fossil fuels responsible for Brookfield’s carbon footprint of about 5,200 metric tons of carbon dioxide.

And only this week, the Financial Times of all media, has pointed out that such ethical investments usually fail because companies have no intention of reducing carbon emission production.  “Capitalism’s restless innovation when it comes to electric cars or plant-based food has helped consumers to enjoy the same standard of goods, or something close, while cutting their carbon footprint. But canny marketers have also used environmentalism to relabel many, at best, neutral products as world-saving. Environmentally friendly finance is shaping up in a similar vein: investors will find that new product badging cannot replace the hard work of scrutinising exactly what is being offered. Despite the promises, it is never easy being green.”

Just as Draghi did not quote Karl Marx but Reinhart Marx in his argument for the ‘moral’ control of market forces, so Carney avoids Karl and instead relies on Adam Smith and Oscar Wilde.  But he does not mention that Wilde, the great playwright, poet and literary genius, was a committed socialist.  The Wilde aphorism is clearly a socialist not a moral message.

Wilde’s essay, The Soul of Man under Socialism, expressed exactly the opposite of Carney’s conclusions.  Yes, capitalism commodifies social needs (use values) into value and profit for capital.  That leads to poverty, inequality, crises, financial crashes, climate change, pandemics and environmental destruction.  But the answer for Wilde was not to get capitalism to temper its destructive nature with moral values.  As Wilde says: It is immoral to use private property in order to alleviate the horrible evils that result from the institution of private property. It is both immoral and unfair.”

Wilde goes on: “Under Socialism all this will, of course, be altered. There will be no people living in fetid dens and fetid rags, and bringing up unhealthy, hunger pinched children in the midst of impossible and absolutely repulsive surroundings. The security of society will not depend, as it does now, on the state of the weather. If a frost comes we shall not have a hundred thousand men out of work, tramping about the streets in a state of disgusting misery, or whining to their neighbours for alms, or crowding round the doors of loathsome shelters to try and secure a hunch of bread and a night’s unclean lodging. Each member of the society will share in the general prosperity and happiness of the society, and if a frost comes no one will practically be anything the worse.”

Wilde concludes: “Socialism, Communism, or whatever one chooses to call it, by converting private property into public wealth, and substituting co-operation for competition, will restore society to its proper condition of a thoroughly healthy organism, and insure the material wellbeing of each member of the community. It will, in fact, give Life its proper basis and its proper environment.”

It’s not really value versus price, but social need versus private profit.

13 thoughts on “Mark Carney: value or price?

  1. Oscar Wilde, beautiful optimist he was, obviously remained blind to the the nature of the beast – as so wonderfully expressed by Blaise Pascal:

    ““What a Chimera is man! What a novelty, a monster, a chaos, a contradiction, a prodigy! Judge of all things, an imbecile worm; depository of truth, and sewer of error and doubt; the glory and refuse of the universe.”

  2. The difference between price and value has tested thinkers for millennia. What value is and how it’s created is the central question in economics (essentially, the only one IMO!).
    This issue is even more pressing at a time when the majority of GDP in advanced economies are intangibles and are only subjectively perceptible.
    Logic suggests that in services, the market not only doesn’t work; it doesn’t actually exist. A value-based approach to economic management and decision-making is now required, not a price-based one.
    Here’s a five-minute video summarising the history of price and its contemporary dethronement

    1. “The difference between price and value has tested thinkers for millennia.”

      No. Labor only becomes value in capitalism. Value didn’t exist before that, so it cannot, logically, have “tested thinkers for millennia”. This is an anachronism.

      There is no doubt about what is value in Marx’s theory. There is no polemic here.

      1. I sincerely believe this is mistaken. Examples of use of the word value in history include:

        In the Al-Muqadimmah (known as Prolegomenon, or preliminary discussion, in the West), the North African Arab historian Abdelrahman Ibn Khaldun said:

        “A portion of the value, whether large or small, comes from (the labour). The share of labour may be concealed. This is the case, for instance, with the prices of food-stuffs. The labour and expenditures that have gone into them show themselves in the price of grain, as we have stated before…It has thus become clear that gains and profits, in their entirety or for the most part, are value realised from human labour.”

        Treatise on Taxes & Contributions, by William Petty, 1662.

        “But that which I would say upon this matter is, that all things ought to be valued by two natural denominations, which is land and labour; that is, we ought to say, a ship or garment is worth such a measure of land, with such another measure of labour; forasmuch as both ships and garments were the creatures of lands and men’s labours thereupon; This being true, we should be glad to finde out a natural par between land and labour, so as we might express the value by either of them alone as well or better then by both, and reduce pence into pounds.”

        Second Treatise of Government by John Locke, 1689

        “…for it is labour indeed that puts the difference of value on every thing; and let any one consider what the difference is between an acre of land planted with tobacco or sugar, sown with wheat or barley, and an acre of the same land lying in common, without any husbandry upon it, and he will find, that the improvement of labour makes the far greater part of the value.”

        Chapter I, Money and Trade Considered. With a Proposal for Supplying the Nation with Money by John Law, 1705

        “Goods have a value from the uses they are apply’d to; And their value is greater or lesser, not so much from their more or less valuable, or necessary uses: As from the greater or lesser quantity of them in proportion to the demand for them. Example. Water is of great use, yet of little value; Because the quantity of water is much greater than the demand for it. Diamonds are of little use, yet of great value, because the demand for diamonds is much greater, than the quantity of them.”

        Essai sur la nature du commerce en general, Richard Cantillon, 1755

        “By these examples and inductions it will, I think, be understood that the price or intrinsic value of a thing is the measure of the quantity of land and of labour entering into its production, having regard to the fertility or produce of the land and to the quality of labour. But it often happens that many things which have actually this intrinsic value are not sold in the market according to that value: that will depend on the humours and fancies of men and on their consumption.

        There is never a variation in intrinsic values, but the impossibility of proportioning the production of merchandise and produces in a state to their consumption causes a daily variation and a perpetual ebb and flow in market prices. However, in well-organised societies, the market prices of articles whose consumption is tolerably constant and uniform do not vary much from the intrinsic value; and when there are no years of too scanty or too abundant production, the magistrates of the city are able to fix the market prices of many things, like bread and meat, without anyone having cause to complain.”

        Reflections on the Formation and Distribution of Wealth by M. Turgot, 1766.

        “In a word, so long as we consider each exchange independent of any other, the value of each thing exchanged has no other measure than the wants or desires of one party weighed with those of the other, and is fixed only by their agreement.”

        Adam smith uses the word value no less than 841 times in Wealth of Nations.
        David Ricardo’s On the Principles of Economy mentions the word 922 times. Its first chapter is entitled “On Value”.

        Das Kapital chapter one focusses on the commodity (War) and says it has embodies two forms of value: use value and exchange value. Both the concepts of use value and exchange value were explicitly referred to by Ricardo.

      2. @ Eddie O’Sullivan

        Yes, the word itself already existed by the time of Marx. If you go to the dictionary, you’ll find many meanings for the word “value”. I mean value the category, not the word.

        Value, in Marx’s theory, is socially necessary human labor counted in units of time.

      3. In the preface of Capital’s volume one, Marx says the commodity (manufactured good) is the value form of the product of labour.

        He forensically analyses the value characteristics of a manufactured good which he argues has simultaneously and indivisibly two characteristics: use-value (Gebrauchswert) and exchange-value (Tauschwert).

        Both these terms were used by Ricardo: Marx didn’t invent them.

        What was original was that Marx used these ideas to show that manufactured goods (Waere, which in my view is wrongly translated as commodities).are both capitalism’s dominant feature and an unprecedented distillation of value.

        Marx’s understanding of manufactured goods is the starting point of his analysis. It is the vector in his system. That’s why Marx’s first sentence is dedicated to manufactured goods (Waere/commodites) and not value, labour, exploitation, profit or surplus value. It’s his most important contribution to economics.

        Marx’s analysis of manufactured goods shows that they embody the conflict between their source of value (labour power) and their owners (the capitalist). They are an expression of a power relationship between workers and the owners of the means of production: in other words, of class conflict which Marx declared in the Communist Manifesto to be the central determinant of human civilisation up to this point.

        Neoclassical/neoliberal/conventional economics in contrast depicts the struggle between supply and demand as being resolved by price. Hence the theory that supply and demand unfettered will lead to equilibrium which is both technically and socially efficient. This idea inspires ALL reformist economic policies (including Lenin’s New Economic Policy).

        The great divide in economic thought is between those that believe/argue that price is the central vector in capitalism and those that argue that power relationships are.

        The contemporary challenge which Michael addresses is reconciling Marx’s analysis of capitalism in the mid-19th century (when the production of manufactured goods was its central obsession) and contemporary capitalism where the creation of services (intangibles) accounts for 80+% of output and employment.

        I argue services are the contemporary value form of labour.

        In other words, services (education services, healthcare, financial advice etc) are in fact intangible commodities, a development of the tangible commodities Marx focussed on (for very good reasons) in the 1850s.

        Others argue that services are not a value form at all and that the surpluses capitalism harvests originate exclusively in tangible good manufacture (Waere).

        Anyway, Marx didn’t invent the concept of value.

        He used it to present his most original idea: the manufactured good in the era when the capitalist mode of production reigns (herrsscht).

  3. Well done, great article. Particularly like the following comment you made: “Carney is not the first of the great and good of the financial elite to ‘moralise’ about the failures of capitalism, once they have retired from carrying out its duties in a high priced but low value series of jobs.” I am going to plagiarise it ad nauseum. Carney is one of the more enlightened and well read of the bourgeoise commentators and one who is familiar with Marx’s conclusions. He personifies the angst felt over the growing and glaring failings of capitalism. Reminds me of a human billboard walking in front of the Bank of England with the front board proclaiming “Markets may be high”, and the back one proclaiming “But the end is nigh.”

  4. ‘’ It’s not really value versus price, but social need versus private profit ’’.
    Or it is about social profit versus private profit. When socialists lose their fear of talking about socialist benefits, they will take a step forward by verifying that “social necessity” is the same as “social benefit.” In the expression ” private profit ” the problem is not in the word ‘profit’, which is a necessary factor to save, invest and grow, but in the word ‘private’. The word ‘private property’ did not exist before Capitalism. Private, which only indicates a property with a finite and limited number of producer partners greater than one (that was the previous individual property of Feudalism) and a number less than the social totality of citizens (that would be the socialist property). And that word only arises in the 18th century to designate that new property in the bourgeois means of production that displaces and eliminates the individual property of the feudal lords and small artisans. Individual, private and social, that is the time sequence. And It is the sequence of the modes of production.

  5. Capitalism died 2008 and the capitalists are in the various stages of mourning.

    Some capitalists are still in SHOCK the first stage of grieving. Most capitalists, however. are in the second stage of grieving, DENIAL, printing funny money, creating fake investment vehicles, pumping and dumping as usual, pretending it still matters.

    A few capitalists have advanced to the third stage of grieving: BARGAINING. That’s what the World Economic Forum is doing, trying to carve out a deal within which their precious capitalist mode of production can still exist, the so-called “Great Reset.”

    Yet a select few capitalists, like Mark Carney, have managed to get to the fourth stage of grieving GUILT. “Gee-whiz, we got it wrong, sorry.” Yeah, right.

  6. Important to notice that Adam Smith lived in an era where capitalism was still ascendant, therefore he could still afford to be cute by doing some constructive self-criticism of capitalism (because the alternative – going back to feudalism – was straight out worse).

    Neoliberalism forefather Hayek (apud Losurdo) diagnosed Liberalism was on the side of science and reason up until the 1850s. After that, it realized it wasn’t scientific at all and begun its decline phase (negative phase) and begun to side with religious mysticism and then to degenerate intellectually (reaching its most mystical/irrational phase so far with the advent of Nazism, in 1933). The ideology that’s on the side of science and reason nowadays is socialism/communism/Marxism.

    In the academic world, the decline of liberalism can be attested from the death of classical liberalism (political economy) and the rise of what Marx called “vulgar economy”. Vulgar economists already existed during Marx’s time and before him, but they became dominant only after his death. Marx marks the transition of the torch of enlightenment from the liberals to the communists, a condition we still witness today (that’s why Marx is still the central intellectual figure in the political-geopolitical debate).

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