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Is capitalism doomed?

There’s more to consider than the market index and interest rates

Bank of England governor Mark Carney didn’t mince words. Capitalism is at risk of destroying itself! In his May 27 speech at the Conference on Inclusive Capitalism in London, he openly criticized the penchant for rewarding short-term performance while ignoring the long-term consequences that fueled the present financial crisis.

The governor explained the problem. “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… Market fundamentalism contributed directly to the financial crisis and the erosion of social capital.”

Fortunately Carney, also chair of the G20’s Financial Stability Board, is working on solutions. He is confident they will go a long way to help fix a financial system that is broken.

The former Bank of Canada governor’s speech highlighted the growing evidence that relative equity in a society is good for growth. But research indicates that in recent years, virtually without exception, societies have been moving in the opposite direction.

Carney also expressed concerns related to intergenerational inequities, social welfare systems that may become unaffordable in the future and environmental degradation. He argued that “it is necessary to recognize the importance of values and beliefs in economic life.”

The speech focused on four solutions the Bank of England and the Financial Stability Board are working on with a sense of urgency: ending too-big-to-fail, creating fair and effective markets, reforming bankers’ compensation, and building a sense of vocation and responsibility. Carney hopes that these efforts will help maintain the social capital that is needed for market-based economies to thrive; an antidote to the “heads-I-win-tails-you-lose bubble” that major banks have operated in.

But he emphasized that regulations alone are not enough: “Integrity can neither be bought nor regulated. Even with the best possible framework of codes, principles, compensation schemes and market discipline, financiers must constantly challenge themselves to the standards they uphold.”

As I listened to Carney’s speech and the Q&A that followed, I wondered whether his bedside reading includes the Book of Proverbs. That would be a plausible guess when a banker of his stature uses words like fair and trusted to describe the ideal financial system. When compared to the popular view that Carney’s former employer of 13 years, Goldman Sachs, was part of the problem, this is somewhat ironic!

Canada’s economy is doing rather well compared to many other developed nations, thanks in part to Carney’s influence when he was Bank of Canada governor. But that is not a reason to ignore his message. A secular “money conference” highlighting the desirability of biblical virtues and ideals should prompt some serious soul-searching.

What is your attitude to money and wealth? Are they the means to an end? Or is your end game to simply have as much money as possible? Rich or poor, words alone are not enough; the right values and beliefs need to be nurtured. Followers of Jesus should be the solution, not part of the problem.

Henry Friesen is a chartered accountant who contemplates economic issues near Winnipeg.

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About the author


Henry Friesen is a chartered accountant who lives in a small town near Winnipeg, Manitoba.

About the author