Bank of England governor: capitalism doomed if

ethics vanish
Mark Carney issues strong critique of City behaviour and warns of growing sense that
basic social contract is breaking down

'We simply cannot take the capitalist system for granted,' says Carney. Photograph: Andy Rain/EPA

Capitalism is at risk of destroying itself unless bankers realise they have an

obligation to create a fairer society, the Bank of England governor has
warned.
Mark Carney said bankers had operated a "heads-I-win-tails-you-lose"
system. He questioned whether traders met ethical standards and said that
those who failed to meet high professional standards should face
ostracism.
Speaking at a City conference, the Bank's governor warned that there was
a growing sense that the basic social contract at the heart of capitalism was
breaking down amid rising inequality. "We simply cannot take the capitalist
system, which produces such plenty and so many solutions, for granted.
Prosperity requires not just investment in economic capital, but investment
in social capital."
In a strongly worded critique of City behaviour in the run-up to the financial
crisis, Carney said market radicalism and light-touch regulation had eroded
fair capitalism, while scandals such as the rigging of Libor markets had
undermined trust in the financial system.
"Just as any revolution eats its children, unchecked market fundamentalism
can devour the social capital essential for the long-term dynamism of

capitalism itself. To counteract this tendency, individuals and their firms

must have a sense of their responsibilities for the broader system."
Carney told delegates at a conference on inclusive capitalism in London
which was attended by the former US president Bill Clinton that big banks
had operated in a "heads-I-win-tails-you-lose bubble", with personal gain
hotly pursued by bankers.
"All ideologies are prone to extremes. Capitalism loses its sense of
moderation when the belief in the power of the market enters the realm of
faith. In the decades prior to the crisis such radicalism came to dominate
economic ideas and became a pattern of social behaviour."
The governor added that policymakers and regulators in the UK and
internationally were addressing ways of making the system fairer and of
limiting the likelihood of a future financial crisis through reforms.
But he stressed that there was a greater onus on banks and also bankers
to take responsibility. Referring to changes afoot, after the scandals in fixed
income, currency and commodity markets, he said: "Such changes are vital
but they cannot anticipate every contingency or discipline every miscreant.
"The scandals highlight a malaise in corners of finance that must be
remedied. Many banks have rightly developed codes of ethics or business
principles, but have all their traders absorbed their meaning?
"Consideration should be given to developing principles of fair markets,
codes of conduct for specific markets, and even regulatory obligations
within this framework. There should be clear consequences including
professional ostracism for failing to meet these standards."
He said G20 leaders and international regulators on the Financial Stability
Board were working to resolve the issue of financial institutions that were
"too big to fail", a problem which left taxpayers with a huge bill at the onset
of the crisis in 2008.
"This is the year to complete that job," he said. "Perhaps the most severe
blow to public trust was the revelation that there were scores of too-big-tofail institutions operating at the heart of finance. Bankers made enormous
sums in the run-up to the crisis and were often well compensated after it
hit. In turn, taxpayers picked up the tab for their failures."

Carney said that ultra loose monetary in the UK had helped to prevent a
lost generation of long-term unemployed, and improved long-term social
mobility prospects.
He added new powers and responsibility handed to the Bank by George
Osborne should help to reduce incidence of financial crises.
He said one of the lessons of the crisis was that compensation schemes
that delivered large bonuses for short-term returns encouraged individuals
to take on too much long-term risk. "In short, the present was overvalued
and the future heavily discounted."

It's simple. If we can't change our economic system,

our number's up
It's the great taboo of our age and the inability to discuss the pursuit of perpetual
growth will prove humanity's undoing

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George Monbiot

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The Guardian, Tuesday 27 May 2014 18.38 BST

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'The mother narrative to all this is carbon-fuelled expansion. Our ideologies are mere subplots.' Photograph: Alamy

Let us imagine that in 3030BC the total possessions of the people of Egypt
filled one cubic metre. Let us propose that these possessions grew by 4.5%
a year. How big would that stash have been by the Battle of Actium in
30BC? This is the calculation performed by the investment banker Jeremy
Grantham.
Go on, take a guess. Ten times the size of the pyramids? All the sand in the
Sahara? The Atlantic ocean? The volume of the planet? A little more?It's
2.5 billion billion solar systems. It does not take you long, pondering this
outcome, to reach the paradoxical position that salvation lies in collapse.
To succeed is to destroy ourselves. To fail is to destroy ourselves. That is
the bind we have created. Ignore if you must climate change, biodiversity
collapse, the depletion of water, soil, minerals, oil; even if all these issues
miraculously vanished, the mathematics of compound growth make
continuity impossible.
Economic growth is an artefact of the use of fossil fuels. Before large
amounts of coal were extracted, every upswing in industrial production
would be met with a downswing in agricultural production, as the charcoal
or horse power required by industry reduced the land available for growing
food. Every prior industrial revolution collapsed, as growth could not be
sustained. But coal broke this cycle and enabled for a few hundred years
the phenomenon we now call sustained growth.
It was neither capitalism nor communism that made possible the progress
and pathologies (total war, the unprecedented concentration of global
wealth, planetary destruction) of the modern age. It was coal, followed by

oil and gas. The meta-trend, the mother narrative, is carbon-fuelled

expansion. Our ideologies are mere subplots. Now, with the accessible
reserves exhausted, we must ransack the hidden corners of the planet to
sustain our impossible proposition.
On Friday, a few days after scientists announced that the collapse of the
west Antarctic ice sheet is now inevitable, the Ecuadorean government
decided to allow oil drilling in the heart of the Yasuni national park. It had
made an offer to other governments: if they gave it half the value of the oil
in that part of the park, it would leave the stuff in the ground. You could see
this as either blackmail or fair trade. Ecuador is poor, its oil deposits are
rich. Why, the government argued, should it leave them untouched without
compensation when everyone else is drilling down to the inner circle of
hell? It asked for $3.6bn and received $13m. The result is
thatPetroamazonas, a company with a colourful record of destruction and
spills, will now enter one of the most biodiverse places on the planet, in
which a hectare of rainforest is said to contain more species than exist in
the entire continent of North America.

Yasuni national park.

Murray Cooper/Minden Pictures/Corbis

The UK oil firm Soco is now hoping to penetrate Africa's oldest national
park, Virunga, in the Democratic Republic of Congo; one of the last
strongholds of the mountain gorilla and the okapi, of chimpanzees and
forest elephants. In Britain, where a possible 4.4 billion barrels of shale oil
has just been identified in the south-east, the government fantasises about
turning the leafy suburbs into a new Niger delta. To this end it'schanging
the trespass laws to enable drilling without consent and offering lavish

bribes to local people. These new reserves solve nothing. They do not end
our hunger for resources; they exacerbate it.
The trajectory of compound growth shows that the scouring of the planet
has only just begun. As the volume of the global economy expands,
everywhere that contains something concentrated, unusual, precious, will
be sought out and exploited, its resources extracted and dispersed, the
world's diverse and differentiated marvels reduced to the same grey
stubble.
Some people try to solve the impossible equation with the myth of
dematerialisation: the claim that as processes become more efficient and
gadgets are miniaturised, we use, in aggregate, fewer materials. There is
no sign that this is happening. Iron ore production has risen 180% in 10
years. The trade body Forest Industries tells us that "global paper
consumption is at a record high level and it will continue to grow". If, in the
digital age, we won't reduce even our consumption of paper, what hope is
there for other commodities?
Look at the lives of the super-rich, who set the pace for global
consumption. Are their yachts getting smaller? Their houses? Their
artworks? Their purchase of rare woods, rare fish, rare stone? Those with
the means buy ever bigger houses to store the growing stash of stuff they
will not live long enough to use. By unremarked accretions, ever more of
the surface of the planet is used to extract, manufacture and store things
we don't need. Perhaps it's unsurprising that fantasies about colonising
space which tell us we can export our problems instead of solving them
have resurfaced.
As the philosopher Michael Rowan points out, the inevitabilities of
compound growth mean that if last year's predicted global growth rate for
2014 (3.1%) is sustained, even if we miraculously reduced the consumption
of raw materials by 90%, we delay the inevitable by just 75 years.
Efficiency solves nothing while growth continues.
The inescapable failure of a society built upon growth and its destruction of
the Earth's living systems are the overwhelming facts of our existence. As a
result, they are mentioned almost nowhere. They are the 21st century's
great taboo, the subjects guaranteed to alienate your friends and
neighbours. We live as if trapped inside a Sunday supplement: obsessed
with fame, fashion and the three dreary staples of middle-class
conversation: recipes, renovations and resorts. Anything but the topic that
demands our attention.

Statements of the bleeding obvious, the outcomes of basic arithmetic, are

treated as exotic and unpardonable distractions, while the impossible
proposition by which we live is regarded as so sane and normal and
unremarkable that it isn't worthy of mention. That's how you measure the
depth of this problem: by our inability even to discuss it.
Twitter: @georgemonbiot. A fully referenced version of this article can be
found at Monbiot.com