Signs And Wonders


It was Mervyn King as Bank of England’s chief economist and later deputy governor in the 1990s who placed the fight against inflation at the heart of economic policy in United Kingdom (UK) and perhaps elsewhere. Reports have it that King carefully avoided partisanship to ensure that politics would not impair the central bank’s independence in setting interest rates and keeping inflation stable.

King, who ultimately became governor in 2003, is also the author of quite a number of books on a wide range of topics. The coverage is unusually wide, perhaps as wide as his intellect. His Radical Uncertainty, for instance, focuses on decision making beyond the numbers. He also produced Issues in Monetary Policy, Public Policy and the Corporation, The British Tax System, Bank and Brokerage and, on accountants being able to save the planet, Chief Value Officer.

It was perhaps this last book with Jill Atkins of Sheffield University Management School that captures his ideas about value creation. An accountant should no longer be financial officer but value officer, one who would assess value using lenses other than the financial. An accountant, to King and Atkins, could therefore be the changemaker. Integrated reporting becomes a major component in value creation as it consolidates varied information about a nation’s economic development or an entity’s strategy, governance, performance, and prospects. These reflect, rather than assume away, the commercial, social, and environmental context of their operations. Economic activities impact the environment, or even climate, but this is rarely considered part of the cost to society.

When he spoke at an Impact Session at the 2020 Finance Indaba Network, King argued that “successful businesses have moved away from creating profits for shareholders to focusing on long-term value creation.” The former governor also advocated an extinction accounting framework based on the risk of habitat destruction and pollution.

King’s successor, former Bank of Canada Governor Mark Carney, also produced a book after his term ended in 2020. Values, released in 2021, took after King’s enlightened views on what creates value. For Carney, it is the individual’s values, or a society’s values. The urgency could not have been more pressing than today when we see “a crisis of values that manifests in vast and deepening inequalities of wealth, opportunity and health, and which is crystallizing in the tragedies of COVID and climate change.”

Both King and Carney are fortunate for having found the courage to recognize the breakdown of values in society, that is, “when values in the market usurp those of humanity” before they reach 70. This observation is difficult to make in the Philippines when even seniors in public offices continue to wreak havoc on society’s values in something as basic as discerning between what is good or bad for the economy and the nation, and in exemplifying what right leadership is all about.

Carney presents two perspectives of value, objective and subjective.

Objective-wise, value is determined by the production of goods and services. Supply and demand forces drive value dynamics while production affects wages, profits, and rents. The nature of production and everything else related to it — like time required for production, quality of labor deployed, and technological contributions — are tied with value.

Subjective-wise, value is determined by the exchange value, or the price of goods and services in the market. Value is determined by the beholder, by his preferences and taste, and, to a lesser extent, contrary to fundamental market principle, scarcity. Carney explains that in terms of assigning value, any good or service that is not priced is “neither valued nor valuable.”

It is interesting to read Carney’s propositions on the three sets of risks coming out of the view that market outcome equals value creation, or when the subjective perspective value creation holds sway.

First is market failure which could result in the tragedy of the commons, that is, individual self-interest trumping the common good of all, when freely accessing a resource without constraint posed by social structure or values, taxes, or fees. In its wake, the environment is destroyed, or the resources are depleted. Filipino politicians’ destruction of our forests in their logging operations, or our mountains in their quarrying operations, or our rivers and seas from their mining operations, top the list of examples.

Aristotle was therefore prescient to have explained that what is common to the greatest number of people gets the least amount of care.

The second is driven by human nature. We tend to support ideas that we happened to subscribe to, even if they were subsequently proven wrong. Even new information is not enough to deter us from adhering to past mistakes. This is a debilitating risk because it could prevent us from making investments to reduce risks tomorrow. Carney drove home the point that despite the eight centuries of financial crises, global banks continue to fail to build up enough capital buffers.

Or, despite the pandemic in this era, we might again fail to prepare our medical system for another pandemic tomorrow. Or, despite the evidence today of climate change, we would still fall short of what it takes to mitigate deadly climate change.

One quick word: the Maharlika Investment Fund does not exactly qualify as an investment for tomorrow because it undermines society today from preparing itself by way of having quality education, high-level healthcare, and big-ticket infrastructure system for tomorrow’s challenges. By its many provisions, the fund corners earnings from government financial institutions, government corporations, and the Bangko Sentral ng Pilipinas (BSP) that would otherwise contribute to the budget in funding these social needs. It presumes it could do better than the treasurers of these institutions. It assumes the BSP could continue to promote price and financial stability even if it would remain undercapitalized for the next 17 years.

The third risk is the flattening of our own values. When decisions on pricing have to be made, market prices are simply summed up with no attention given to their priority or distribution. As a result, that which is not priced is ignored. For instance, when we do the usual national income accounts, we never assign cost to the social dislocation of farm lands replaced by subdivisions, memorial parks, or shopping malls. This is the kind of risk that gives way to trade-offs of growth this year, and a crisis next year, of lives and livelihoods, of planet and profit.

This risk is behind the country’s perennial problem of corruption and bad governance, the culture of impunity. Political candidates cheat in the election because winning political posts is considered a primordial success, a market metric of importance. Not a few market players value political connections higher than competence, experience, and integrity. Very few would dispute that the dynamics in Congress after each election is directed less by convictions on political issues and more by benefits from the Palace.

Indeed, if the Philips curve in the Philippines is flattening, it seems to me this is matched only by the sharp flattening of Filipino values in Carney’s taxonomy of risks.

It is in this area where we differ from Singapore where values have been wedded to the welfare of the nation state. Everything rises and falls with the leaders, and Singapore’s founding father, Lee Kuan Yew; Go Keng Swee, who engineered its economic miracle; and S. Rajaratnam, who guided the underlying state philosophy, embodied and implemented meritocracy, pragmatism, and honesty. In more ways than one, these attributes are consistent with Carney’s five hallmarks of good leadership namely, purpose, perspective, clarity, competence, and humility.

The results could not have been different. Having been independent for only a little over 50 years, Singapore managed to increase its per capita income of $500 in 1965 to nearly $83,000 in 2022. Poverty is almost non-existent and malnutrition disappeared many years ago. Singapore’s value has not definitely flattened but steepened instead.

Carney’s Values suggests how countries can build value for all. Unlike many policy prescriptions, Carney’s proposal combines building institutions and markets and a sense of purpose and common values among individuals, companies and countries. He emphasized “the imperatives of developing these by building vocation for individuals, instilling purpose in companies and appealing to patriotism over nationalism within countries.” Carney by no means suggests to do away with markets. Their dynamism is necessary to attain prosperity and well-being. To accommodate markets, we need to reclaim values to create value for all through that sense of solidarity, fairness, responsibility, resilience, sustainability, dynamism, and humility.

It is humbling to read Carney who holds the distinction of governing two major central banks claiming humility because of events beyond his control and the responsibilities he had to carry out. His passion is to see “radical changes to build a better world for all.”

As a minister of the Gospel, we also share that passion, the prayer that many of us are also hopeful that change is still possible in the Philippines.


Diwa C. Guinigundo is the former deputy governor for the Monetary and Economics Sector, the Bangko Sentral ng Pilipinas (BSP). He served the BSP for 41 years. In 2001-2003, he was alternate executive director at the International Monetary Fund in Washington, DC. He is the senior pastor of the Fullness of Christ International Ministries in Mandaluyong.