To begin with, it can be said that a book which asks us to reappraise the market system is very timely against the backdrop of several financial crises, Covid and the more palpable fear of climate change and its repercussions. There is a big difference between ‘value’ which all of us in the corporate sector talk of, and ‘values’, which goes back to the basics of ethical living. And this is what Mark Carney talks about in his book, Value(s).
Capitalism works on the basis of value, which is the price of any product or service and translates finally to profit. Values, on the other hand, refer to basic principles that looks at society at large. It is more in the area of ethics where we should value our surrounding and follow practices which help all—or at least are not detrimental to others. The future, according to Carney, would be ‘value’ getting aligned to ‘values’ and not the other way round, which is the case today.
This is a very interesting book that actually tilts towards the Rawlsian principles and does not fully support unfettered market capitalism. And here, according to Carney, we all have a role to play, which includes governments and corporate leaders.
Carney is better known for being the first outsider to be appointed as governor of Bank of England, but has a very interesting career graph having worked with an investment bank. Therefore, there is a 360-degree view on the way in which economies work, and as the head of two central banks, he has also seen how states function. Today he is more into propagating impact investing where precedence is given to ‘values’ over ‘value’.
The book is a combination of basic economics and economic history with a lot of ethics thrown in. At times it could sound like preaching, but that probably is required as we have seen systems collapse due to absence of morals in business. The present way of thinking is that in a market system everything goes, as long as ‘value’ is created. This is why we have had several crises, especially in the financial world as players game the system. It is interesting that people make several compromises in the name of creating ‘shareholder value’ that they neglect the welfare of their employees, society and environment. Some of the repercussions have already been seen.
In the author’s view, Covid has been a turning point because somewhere everyone realised the importance of life and almost all governments turned their attention to saving lives, which also meant spending more on healthcare and related issues, which is how things should be. Health over economy is quite rightly the priority. But we need to ask ourselves in India: Do we always do this as there have been several calamities every year, and we do let them pass without any empathy. Something we should think about seriously. There is some hope here that the basic rules of social contract that were turned upside down by the market have started reverting and hopefully will continue.
Carney, in this rather exhaustive book, keeps reiterating three things about the market, which are falsehoods that have been given as excuses for failure. These phrases are ‘this time is different’, ‘markets are always right’, and that ‘markets are moral’, which can never be used as justifications for systemic crises. We should steer clear from these delusions and change the way we operate.
So, what should we be doing? He says we should go back to the underpinnings of markets that famous economists Adam Smith and Friedrich Hayek espoused. They spoke of certain beliefs that are part of inherited social capital, which provides the framework for free markets. The common values and beliefs that we need to pursue now based on our stories of financial crises are dynamism, resilience, sustainability, fairness responsibility, solidarity and humility. These basic principles are self-explanatory. For business leaders, his message is that they should continuously engage, explain and emote to all the stakeholders, which include clients, colleagues and community. In short, we cannot take things for granted and need to create a strong ethical foundation of trust.
Markets cannot be left to solve our problems as they are social constructs that are determined by the rules of the state and the values of society. The latter determine the principles on which markets are created. It should not be the other way round, where markets guide the state and society. And this is probably a question that we should be pondering over in India, especially when we analyse several anomalies in public policy over the last couple of decades. We need to have strong independent institutions to enable this equilibrium.
And as he now is involved in impact investing, Carney quite rightly emphasises that we need to rebalance the components of stakeholder value and progressively calibrate sustainable and financial values. Strategic investors should put their money where both are maximised.
Madan Sabnavis is an independent economist
Value(s): Building a Better World for All
Pp 600, Rs 699