What we think of as ‘valuable’ is changing amid coronavirus and firms will be judged on how they behaved, says former BoE governor Mark Carney
- He said companies would be judged by ‘what they did during the war’
- This meant how they treated employees, suppliers and customers
- Writing in The Economist, he said the pandemic would lead to a fragmented global economy and could change our ideas around what is valuable
- Learn more about how to help people impacted by COVID
The coronavirus pandemic has shown societies value the health of their citizens more than the health of their economies, Mark Carney said today.
The former Bank of England governor said companies would be judged ‘by “what they did during the war”, how they treated employees, suppliers and customers, by who shared and who hoarded’, and that the crisis was a ‘test of stakeholder capitalism’.
Carney, who took over Britain’s central bank five years after the 2008 financial crisis, wrote the article for The Economist and said what was deemed valuable would change after the pandemic.
Mark Carney said the trend of an asset or activity needing to have a market value to be deemed valuable could change after the coronavirus pandemic
Previously, he said, an asset or activity needed to have a market value in order to be seen as valuable.
But he wrote: ‘Fundamentally the traditional drivers of value have been shaken, new ones will gain prominence, and there’s a possibility that the gulf between what markets value and what people value will close.’
He added that our new way of living locally and connecting digitally will create four broad trends:
– An increasingly fragmented global economy;
– The taking up of company enterprise value by lost cashflows and increased financial support from governments;
– A change in how companies balance risk and resilience and prepare for catastrophe;
– Less appetite from individuals to take on financial risk from markets, sectors and companies as they face the fear of being unemployed, uninsured or worse.
Speaks out on climate change
The man who ran the Bank of England for seven years also shared thoughts on how our response to the coronavirus pandemic could affect our response to climate change, an issue he has become increasingly vocal about in recent years.
He is due to become a special envoy on climate change and finance for the United Nations, and said late last year ‘every company, every financial institution, every asset manager, pension fund or insurer’ needed to spell out their plan for dealing with climate change.
Carney wrote today that a trend towards isolation and individualism amid the coronavirus pandemic, which has seen individual countries enforce their own individual lockdowns and scramble over each other to try and procure tests and protective equipment, and US president Donald Trump withdrawing funding from the World Health Organisation would be tested by climate change.
He wrote: ‘After all, climate change is an issue that i) involves the entire world, from which no one will be able to self-isolate; ii) is predicted by science to be the central risk tomorrow; and iii) we can only address if we act in advance and in solidarity.’
The new series in The Economist is called ‘the world after Covid-19.’
Mr Carney stepped down as Bank of England governor last month and was replaced by Andrew Bailey.
A few days before stepping down, the base rate was cut to 0.25 per cent from 0.75 per cent just ahead of the Budget, delivered by Rishi Sunak.
Three days after Mr Bailey’s appointment, base rate was cut to an all-time low of 0.1 per cent in response to the coronavirus outbreak and the economic chaos it is predicted to create.