Jeremy Warner; Editorial Comment:
Behind the argument between Carney and King is a fight that has engulfed the entire nation
Just about everyone else is at daggers drawn over Brexit, so nobody should be surprised to see the normally civil relationship that is expected between an incumbent Governor of the Bank of England and his immediate predecessor reduced to the level of a bar room brawl. The same madness, paranoia, anger and loss of any sense of proportion that afflicts the wider population has consumed even these supposedly disinterested “Lords of Finance”.
The standoff has been simmering ever since the referendum campaign, when Mark Carney waded in to warn of dire consequences for the economy if voters rejected the status quo.
His predecessor, Mervyn King, later broke with etiquette – it’s a definite no no in central banking to criticise your successors – to say how saddened he was to see the Bank of England drawn into a matter beyond its mandate, and in essence condemned Mr Carney’s warnings as scaremongering nonsense.
The two have been trading insults ever since – I exaggerate only a little – with Lord King last week directly challenging the Bank of England’s blood-curdling assessment of a no-deal exit to say that the short-term disruptions should prove manageable and the long-term consequences for the economy insignificant. A furious Mr Carney immediately hit back, pointing to business surveys that predict falls of three percentage points in both GDP and employment – with investment and exports tumbling – in the event of a cliff edge no-deal Brexit.
Steeped in economics, both are meant to know about this stuff, and provide us with evidence-based analysis of the country’s situation, yet they could hardly be further apart in their judgment. In part, this only confirms the old joke about economists; that if you put 10 of them in the same room together you will get 11 diametrically opposed opinions.
It is also in part personal. Lord King was appalled by the appointment of Mr Carney, a foreigner and supposed international “rock star” among central bankers; he saw it as in some way a judgment on his own tenure and an insult to well-qualified, internal, British candidates.
Overriding it all, however, is a much more obvious explanation. Brexit is not at root about economics at all. It is about sovereignty and national identity, and above all, on both sides of this war without muskets (so far at least, mercifully), it is about belief.
Mr Carney and Lord King are mere ciphers for that growing sense of national intolerance and division, one a stereotypical “citizen of nowhere”, the other a cricket-loving believer in the merits of nationhood. Both are guilty of letting their beliefs on Brexit get in the way of their economics.
When Mr Carney warned this week that the chances of leaving the EU without a deal had become “alarmingly high” it barely registered in financial markets. Once upon a time, the Governor’s remarks would have caused the pound to slump; now they are taken as just part of the politics, in this case another attempt to put pressure on MPS to agree a deal.
A friend of mine, the historian Michael Burleigh, recently wrote in the New Statesman that he could never vote Conservative again, as Brexit had given voice to the worst elements in the party. In their obsession with Brexit, he said, they had made our country an international joke while neglecting so much that needs putting right. Writing on these pages this week, Paul Ennew, a long-standing member of the Conservative Party, also said he could never vote Tory again, but for very different reasons, in his case because he thought the electorate was being betrayed.
Similar divisions and hatreds afflict the Labour Party. Rarely has public disillusionment with our two party system been as deep and angry. Tribal loyalties, in combination with our first-past-the-post electoral system, may sustain the party political status quo a while longer, but beneath the pretence our two great parties – and indeed the electorate as a whole – are quite plainly splitting asunder into a raft of single-issue, special-interest groupings. Brexit may be the immediate cause of this fragmentation, but it is by no means a uniquely British affair. It’s happening all over Europe, where the traditional centre-right and centre-left incumbency seems incapable of accommodating the economic stagnation and ever more diverse identity politics of the age.
Historical precedent shows politics of this kind to be extremely dangerous, making a nation essentially ungovernable by consent and therefore highly susceptible to darker forces. In his valedictory column for this newspaper, Christopher Booker said that he used to write to change the world, but he fears now that he is only writing its epitaph. I say this as an almost panglossian optimist who trusts in things always righting themselves in the end, but I’m beginning to think he is right.
It’s no longer about the spirit of political compromise and the validation of rising GDP. Nor is it about whether Brexit is more self harm than economic liberation. Much more primeval forces are at play, and they have engulfed the Bank of England along with everyone else.