WASHINGTON (Reuters) - In other ages, we have called on shamans or saints in times of crisis when the usual remedies have not worked.
In the stagnant world economy today, we have designated central bankers as our superheroes, and we are relying on their magical monetary powers to restart global growth.
As the European Central Bank president, Mario Draghi, whom some have nicknamed Super Mario, said this month: "There was a time, not too long ago, when central banking was considered to be a rather boring and unexciting occupation."
Not anymore. No one embodies this new glamour more than Mark Carney, the 48-year-old governor of the Bank of Canada, who has been tapped to lead the Bank of England, making him the first foreign governor in the institution's 319-year history.
The bar for Carney could not be higher. A cartoon in the British papers made the point. It showed a Bethlehem inn with Joseph leading Mary on a donkey. The caption above the innkeeper's head declares: "Unless you're Mark Carney, you'll have to make do with the stable."
Carney's star power was reflected in the packed house that turned out in Washington on Thursday to hear him at a Thomson Reuters Newsmaker interview. Carney, who told legislators he hoped his departure from Britain would be "less newsworthy" than his arrival, continued his effort to play down heroic expectations.
He deftly dodged questions about the British economy, saying it was not his job to comment on Britain yet. And he pointed out that fiscal policy — the domain of the elected authorities — and the private sector were the true engines of economic liftoff.
"If we want to talk about ultimate sources of growth, sustainable fiscal policy is a necessary condition. Sustainable growth comes from the private sector, not from the (International Monetary Fund), the Bank of Canada or anyone else," he said.
He also took care to delineate the proper lines of authority between the central bank and the Ministry of Finance, and steadfastly declined repeated invitations to overstep them. "Central bankers take fiscal policy as given," Carney said. "Treasuries take monetary policy as given. That's the separation, and I'm not going to wade in positively, negatively, neutrally."
Within those constraints, though, Carney offered a cautiously optimistic view of the world economy.
"The important development in our opinion over the course of the last 12 months or so, is that the quality of private-sector growth in the United States has picked up," he said. "The U.S. is moving towards that class of advanced economies that have well-functioning financial systems where private credit is growing and where there is reasonably solid investment growth."
That is good news for Canada, as Carney said, and it is also good news for the rest of the world.
Carney believes that a crucial element in restoring sustainable global growth is finishing the job of repairing global finance and the regulatory framework in which it operates. As the head of the Financial Stability Board, set up by the Group of 20 major economies in the aftermath of the financial crisis, he is one of the leaders in that effort.
A major focus is repairing the gap that was revealed in the emergency response to 2008 — the existence of "too big to fail" banks, whose owners and executives pocket profits in the good times but get a state bailout when things go awry. Over the next few days in Washington, during the spring meetings of the IMF and the World Bank, Carney and other central bankers and finance ministers will continue to hammer out a way to let banks die without requiring taxpayers to foot the bill.
The recent crisis in Cyprus gave a messy preview of how that sort of resolution might work.
Carney hopes that global guidelines — and they need to be simple enough, he said, to be usable in the time frame in which the authorities in the real world must often operate — will make future resolutions cleaner and more predictable.
That game plan, he believes, should include bail-ins, or making stakeholders in the banks pay most of the costs.
"Bail-in broadly speaking — not bail-in as it was performed a couple of weeks ago in Cyprus — but bail-in as a component of addressing systemic risk," Carney said, "is an absolutely necessary element. It doesn't solve everything, but it's absolutely necessary."
Having lost our faith in the private sector and the bankers who dominated so many Western economies before 2008, some are looking to government bankers like Carney.
One of the analytical mistakes before the financial crisis was believing that efficient markets were perfect and that private bankers could police themselves.
Refreshingly, Carney is not making the same error in reverse. He is a believer in regulation and has embraced it at its most complex, global scale. But he said regulators need to be watchful of the unintended consequences of their rules and mindful of the feedback loops between their actions and private markets. The relationship between markets and governments is a complicated process that requires eternal vigilance and constant tweaks.
If the central bankers can pull that off, they will deserve that room in the inn after all.
(This story is corrected with minor transcription errors in paragraphs 8 and 10)
(Chrystia Freeland is managing director and editor, Consumer News, for Thomson Reuters. Prior to joining Thomson Reuters, she worked at the Financial Times, starting out as Eastern Europe correspondent and rising to U.S. managing editor. Freeland was also deputy editor of Canada's Globe and Mail newspaper. She has worked in Ukraine, Moscow, London, Toronto and New York, among other posts.)
Editing by Prudence Crowther