Former central banker (UK/Canada), Mark Carney gives the 2020 Reith lectures. He tackles the purpose of markets, financial system resilience and climate. He has collated much of the current stakeholder, shareholder, free market, “late” capitalism debate and puts it through the lens of the pandemic, bubbles, and climate and from an active and influential player.

I think he’s putting much of the debate in the mainstream and there are critiques both of unregulated markets (not grounded in values) and the need for a just transistion, but also that market forces are very neccessary for wealth generation and to solve the challenges (a critique of those who don’t favour markets at all). In one interpretation that would be arguing for state capacity.

4 hours of lectures (plus some very brief questions from Nobel Lauerates (the likes of Paul Krugman), politicians etc. I don’t have a super simple summary but I would highlight: 

He views markets as a necessary mechanism for wealth creation. But markets are amoral and so needed to be grounded in values, such as social values, and that’s his reading of the full works of, eg, Adam Smith. 

“...Smith’s writings warn of the mistakes of equating money with capital and divorcing economic capital from its social partner….”

His arguments look at unpriced externalities (climate, COVID), human errors (“irrational decisions”) and then…

”…the  drift  from  moral  to  market sentiments.  They  include  the  undercutting  of  the  social  foundations  of  the  market,  the corrosion of values arising from pricing of goods, services and civic virtues, that have been traditionally outside the market, and the flattening of values by forcing decisions to be made according to utilitarian calculations. Let’s take the first of these drifts, the changing nature of markets. Now of course markets don’t exist in a vacuum, the market is a social construct whose effectiveness is determined partly by the rules of the state and partly by the values of society. It requires the right institutions, a supportive culture and the maintenance of social licence. Values of trust, integrity and fairness are critical to effective market functioning, and these values have increasingly been taken for granted. Milton Friedman’s classic  pion  to shareholder value includes the following caveat: A corporate executive’s responsibility is to make as much money as possible, while conforming to the basic rules of society, both those embedded in law and in ethical custom.

And  where  do these  basic  rules  come  from?  Economic  and  political  philosophers from Adam Smith to Friedrich Hayek have long recognised that beliefs are part of the inherited social capital which provides the social framework for the free market. That social capital is the  product  of  both  formal  institutions  and  culture,  including  what  the  Nobel  laureate, Douglass  North,  referred  to  as  incentives  embodied  in  belief  systems.  The  question  is whether  the  expansion  of  the  market,  an  expansion  that  Friedman  helped  unleash,  is changing the underlying social contract on which it has been based. Could the emphasis on the individual over the community or on our selfish traits over our altruistic ones imperil both the market’s effectiveness in determining value and ultimately society’s values? In short, in moving  from  a  market  economy  to  a  market  society,  are  we  consuming  the  social  capital necessary  to  create  economic  and  human  capital?  The  ethical  customs  that  Friedman assumes can change. Indeed, many of those necessary to support market functioning are corroded   when   financial   returns   become  disembodied   from   their   impact   on   other stakeholders.  Friedman  himself  revealingly  acknowledged  the  importance  of  such  moral sentiments when he observed that a company might devote resources to provide amenities to its community, but only in the expectation of attracting employees, and that it could engage in such hypocritical window dressing by calling this social responsibility lest it, and I quote,

“Harm the foundations of the free market to a dmit that this fraud was all in the pursuit of profit alone.” This is how corrosion happens, and did happen in the ensuing decades…”

And in my reading of his lectures, his current views are very formed from his own experience as a central banker as seen here:

“....The starting point is the right balance between the market and the state, and this has shifted  in  recent  decades  with  markets  gaining  in  stature  and  influence.  The  market  is becoming the organising framework, not only for economies, but also increasingly for broader human relations with its reach extending well into civic and family life. In parallel, the social constraints on unbridled capitalism, religion and the tacit social contract have been steadily eased.  The  Thatcher/Reagan  revolution  fundamentally  shifted  the  dividing  line  between markets  and  governments.  This  change  in  direction  was  long  overdue  and  their  reforms unleashed a new dynamism. With the fall of communism at the end of the 1980s, the spread of  the  market  grew  unchecked.  And  so  by  the  time  I  joined  the  G7  as  the  Deputy  Central Bank  Governor  in  the  early  2000s,  the  conventional  wisdom  of  market  efficiency  reigned supreme. Policymakers like myself had nothing to tell the market, they only had to listen and learn. Put it another way, the market was always right. But as my central bank colleague, and later Italian Minister of Finance, Tommaso Padoa-Schioppa once observed, when we grant an entity infinite wisdom, we enter the realm of faith. Faith can guide life, but blind policy, and such cognitive capture led to the self-cancellation of the policymakers’ judgement as only the market  knows.  And  such  trust  dictated  that  the  only  solutions  proposed  to  market  failures were to add more markets or to reduce regulation further…”

There is much more in the lectures especially the 4th one on Climate. Long time readers won’t find anything that new in the climate lecture but he suggests:

“...The solutions to the climate crisis are intimately tied to our fiscal economic and social wellbeing. We need to leverage these social coalitions that have formed for climate action, but those coalitions won’t and shouldn’t hold if we don’t have a just transition. We can’t achieve environmental sustainability if we sacrifice our economy and with it, peoples’ livelihoods. Similarly, we won’t devise all the necessary solutions or implement them with sufficient speed without market forces.

And let me suggest here’s how you can reinforce these efforts.

First, if you work for a company, find out whether it has a plan to transition to net zero. If so, great, how can it be made better? And if it doesn’t have a plan, why not? Does management think governments and people are bluffing with their net zero targets? Or do they consider the company separate from society?

Secondly, wherever you put your hard-earned savings, in a bank, a pension pot, or in stock market, find out whether it’s been managed towards net zero. And if not, why not? Are the people investing your money missing out on major opportunities or are they taking unnecessary climate risks, or do they think that you just don’t care? If you care about the climate, make your money matter.

And third, ask not what the climate is doing to your country, but what your country can do for the climate. Does your country have a credible net zero plan? Does your government require large companies to disclose the impact of climate on their operations and must those companies have net zero plans? Do shareholders, ultimately you have an automatic vote on these plans? In other words a say on transition. Are banks planning for climate failure and do they know how they can contribute to climate success? “

Worth reading for an insight into what he will likely be arguing for in the coming climate talks in Glasgow.

Links to lectures here.