Leading Article: Banking on Carney: George Osborne and the economyGuardian
A lame old Fleet Street joke has it that any story with "Canada" in the first line is guaranteed not to get read. George Osborne has given the lie to that by defying all expectations and reaching across the Atlantic to fill the governorship of the Bank of England. The appointment of Mark Carney of the Bank of Canada is a blow for Britain's economic establishment, whose leading pillars were all in contention, and particularly for Paul Tucker, the deputy governor and continuity candidate, who appears to have been undone by chummy emails exchanged with Bob Diamond, the fallen Barclays boss.
A week before a tricky autumn statement - which may simultaneously pencil in extra cuts and also concede that one of two fiscal targets has now slipped beyond reach - Mr Osborne came to the Commons determined to enjoy himself yesterday, and the house was in obliging mood. As the most important levers of public policy were handed to a foreign national, Ed Balls - who unwisely continues to hail the Bank's independence that he helped instigate - warmly reminisced about how he and Gordon Brown had previously recruited foreign talent such as Willem Buiter and DeAnne Julius to the Bank. Andrew Tyrie, the sometimes-awkward Treasury committee chair, and Geoffrey Robinson, the impish former paymaster general, stood up to pat Mr Osborne on the back. Britain's economists may despair that none among their number is deemed up to the top job, but its slump-weary politicians are desperate for anything at all that might shake up a failing regime, and thus Mr Carney's appointment achieved instant acclaim.
A Canadian passport is an asset, seeing as that country escaped with one of the rich world's smallest slumps and fastest rebounds in 2008-09. Mr Osborne, who first met Mr Carney in opposition, is also drawn to Canada as one of the few countries ever to have pulled off cuts on a scale half approaching his, something it did in the 1990s. During that decade, Canada was rescued by exports to Bill Clinton's booming America; in the more recent recession, it has thrived by being a commodity economy, at a time when the only way is up for commodity prices. Bringing a brainy former Goldman Sachs banker such as Mr Carney to London will not usher in a trade boom nor lead to the discovery of bauxite in Bristol or tar sands in Tunbridge Wells. If Mr Carney is to make a difference, it can only be by changing policy.
Under the Bank's expanded remit, he will command two fields - monetary policy and financial supervision. Canada's record invites confidence on the second. It got a grip on its banks in time to avoid the bailouts of the US and Europe. Mr Carney has not been as radical a reformer as we might have liked, but he dismisses vested interests wailing that prudent regulation will impede growth. But the bigger question remains the macroeconomy. While austerity on the fiscal front is locked in, monetary activism is all we have. Rivals for the job, such as Adair Turner, set out radical stalls, suggesting it may be time for the Bank to finance public debt. While Mr Carney's crisp speeches have been forthright in confronting the state we're in and nasty necessities such as debt writedowns, he has revealed an orthodox preference for sticking with inflation targets. Central banks were first set these mandates in the distant days when slumps were conceived as passing blips, and when nobody was asking whether fiat money had had its day.
A bold new governor might have started by lobbying the chancellor to rewrite his mandate, so that he could do something more useful than chase imported inflation which he cannot control. The whole country will be wishing Mr Carney well, but his public utterances do not suggest he will be so bold. These utterances were made in the very different context of Canada; perhaps he will be more daring in Britain. Mr Osborne certainly ought to hope so. This is very much his personal appointment, and - unless the new governor can do something to turn the economic tide - the blame game will soon enough shift from Threadneedle Street to Horse Guards Road.