U.K. Taps Canada’s Mark Carney To Run the Bank of England

The United Kingdom has done something interesting and tapped Canadian central bank honcho Mark Carney to be the next governor of the Bank of England.

I think it’s a great idea. When you’re hiring for an entry-level job at a magazine, you generally like to see an applicant who’s done some internships and written articles for campus publications. Members of Congress typically have experience in lesser elected offices. Major League Baseball players prove themselves in the minor leagues, and pro football and basketball players demonstrate skills in faux-amateur college leagues. There’s no substitute for on-the-job experience and demonstrated performance. But the logic of that is that smart academics should set central bank policy in small countries—like Stanley Fischer’s move to the Bank of Israel—and central banks in big countries should be run by people who’ve successfully run central banks in small countries.

So good precedent.

Now on to the speculation. The fascinating thing about Canadian banking is that it’s run as an old-school cartel. The banks are supervised quite strictly compared to U.S. or U.K. banks, but they’re also sheltered from competition. The idea is to have a nice, cozy monopoly situation where everyone gets paid, everyone has a really nice desk, and everyone is very risk averse. In American or English banking, you worry that your competitors are going to eat your lunch. In Canadian banking, you’re basically guaranteed that you’ll be fine unless you make bad bets and go bust. It’s a model that looks appealing in many ways post-crisis but also sounds kind of odd when described in broad terms. And it’s also by no means clear how you’d go from here to there.