Mark Carney: Inclusive capitalism – creating a sense of the systemic Speech by Mr Mark Carney, Governor of the Bank of England and Chairman of the Financial Stability Board, at the Conference on Inclusive Capitalism, London, 27 May 2014. *  *  *  Introduction Inclusive capitalism is fundamentally about delivering a basic social contract comprised of relative equality of outcomes; equality of opportunity; and fairness across generations. Different societies will place different weights on these elements but few would omit any of them. Societies aspire to this trinity of distributive justice, social equity and intergenerational equity for at least three reasons. First, there is growing evidence that relative equality is good for growth. 1 At a minimum, few would disagree that a society that provides opportunity to all of its citizens is more likely to thrive than one which favours an elite, however defined. Second, research suggests that inequality is one of the most important determinants of relative happiness and that a sense of community – itself a form of inclusion – is a critical determinant of well-being. 2 Third, they appeal to a fundamental sense of justice. 3 Who behind a Rawlsian veil of ignorance – not knowing their future talents and circumstances – wouldn’t want to maximise the welfare of the least well off? The problem: the growing exclusivity of capitalism This gathering and similar ones in recent years have been prompted by a sense that this basic social contract is breaking down. That unease is backed up by hard data.
More data on the granularity of balance-sheet exposures and across types of financial instruments are essential inputs for evaluating propagation effects with contagion and spillover models. Recent initiatives in central bank statistics also address interlinkages beyond the sample of large players – for example, by means of so-called “from whom to whom” information on deposits and loans from financial corporations, or through securities holding statistics with a view to also creating “who to whom” data for various sectors of the economy in the Euro Area Accounts. Dedicated ad hoc surveys, for example in the context of the ESRB’s work at an EU-wide level, should also contribute to shedding light on this topic. Sufficiently granular information would facilitate linking the regulated financial sector with the shadow banking sector. In addition, enhancing information on financial conglomerates – banking groups with substantial activities over and beyond the banking sector – would be essential, as nonbanking activities may be systemically important. In the case of financial conglomerates, contagion and concentration risks can be exacerbated by the increased intra-group complexity and potential conflicts of interest. At the micro-level, improvements to data for characterising interconnectedness are being pushed forward by several initiatives with different objectives and time lines.